e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QSFr9T4ZTwtEMfvIShwet+GKWoIMgZ8slzMfiVTYu/+1YRcajECmw6MOMeh63iui xlqcqVXn2FTAm2FL2ki8OA== 0000950123-10-039631.txt : 20100428 0000950123-10-039631.hdr.sgml : 20100428 20100428162100 ACCESSION NUMBER: 0000950123-10-039631 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20100331 FILED AS OF DATE: 20100428 DATE AS OF CHANGE: 20100428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPRESS SCRIPTS INC CENTRAL INDEX KEY: 0000885721 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 431420563 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20199 FILM NUMBER: 10777185 BUSINESS ADDRESS: STREET 1: ONE EXPRESS WAY CITY: ST LOUIS STATE: MO ZIP: 63121 BUSINESS PHONE: 3149960900 MAIL ADDRESS: STREET 1: ONE EXPRESS WAY CITY: ST LOUIS STATE: MO ZIP: 63121 10-Q 1 c57451e10vq.htm FORM 10-Q e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010.


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 0-20199

EXPRESS SCRIPTS, INC.

(Exact name of registrant as specified in its charter)


Delaware		43-1420563
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

One Express Way, St. Louis, MO		63121
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (314) 996-0900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Common stock outstanding as of March 31, 2010: 274,048,000 Shares

EXPRESS SCRIPTS, INC.

INDEX


Part I Financial Information

Item 1. Financial Statements (unaudited)			3

a) Unaudited Consolidated Balance Sheet			3

b) Unaudited Consolidated Statement of Operations			4

c) Unaudited Consolidated Statement of Changes in Stockholders’ Equity			5

d) Unaudited Consolidated Statement of Cash Flows			6

e) Notes to Unaudited Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21

Item 3. Quantitative and Qualitative Disclosures About Market Risk			27

Item 4. Controls and Procedures			28

Part II Other Information

Item 1. Legal Proceedings			29

Item 1A. Risk Factors – (Not Applicable)			—

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			30

Item 3. Defaults Upon Senior Securities – (Not Applicable)			—

Item 4. Removed and Reserved			—

Item 5. Other Information – (Not Applicable)			—

Item 6. Exhibits			30

Signatures			31

Index to Exhibits			32
EX-3.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION


Item 1.		Financial Statements

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Balance Sheet


	March 31,			December 31,
(in millions, except share data)	2010			2009
Assets
Current assets:
Cash and cash equivalents	$	1,443.1		$	1,070.4
Restricted cash and investments		10.0			9.1
Receivables, net		2,121.3			2,521.2
Inventories		297.0			313.0
Deferred taxes		141.0			135.0
Prepaid expenses and other current assets		27.2			94.8

Total current assets		4,039.6			4,143.5
Property and equipment, net		362.9			354.1
Goodwill		5,521.4			5,519.2
Other intangible assets, net		1,842.5			1,882.6
Other assets		32.5			31.8

Total assets	$	11,798.9		$	11,931.2


Liabilities and Stockholders’ Equity
Current liabilities:
Claims and rebates payable	$	2,647.0		$	2,850.7
Accounts payable		736.8			706.9
Accrued expenses		645.6			552.4
Current maturities of long-term debt		1,160.1			1,340.1
Current liabilities of discontinued operations		—			6.7

Total current liabilities		5,189.5			5,456.8
Long-term debt		2,492.8			2,492.5
Other liabilities		469.6			430.1

Total liabilities		8,151.9			8,379.4


Stockholders’ Equity:
Preferred stock, 5,000,000 shares authorized, $0.01 par value per share; and no shares issued and outstanding		—			—
Common stock, 1,000,000,000 authorized, $0.01 par value per share; shares issued: 345,110,000 and 345,279,000, respectively; shares outstanding: 274,048,000 and 275,007,000, respectively		3.5			3.5
Additional paid-in capital		2,283.0			2,260.0
Accumulated other comprehensive income		18.0			14.1
Retained earnings		4,448.8			4,188.6

		6,753.3			6,466.2
Common stock in treasury at cost, 71,062,000 and 70,272,000 shares, respectively		(3,106.3	)		(2,914.4	)

Total stockholders’ equity		3,647.0			3,551.8

Total liabilities and stockholders’ equity	$	11,798.9		$	11,931.2

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Operations


	Three Months Ended
	March 31,
(in millions, except per share data)	2010			2009
Revenues ¹	$	11,143.9		$	5,422.8
Cost of revenues ¹		10,478.9			4,888.7

Gross profit		665.0			534.1
Selling, general and administrative		210.9			178.6

Operating income		454.1			355.5

Other (expense) income:
Interest income		1.7			0.9
Interest expense		(42.8	)		(17.1	)

		(41.1	)		(16.2	)

Income before income taxes		413.0			339.3
Provision for income taxes		152.8			124.6

Net income from continuing operations		260.2			214.7
Net loss from discontinued operations, net of tax		—			(0.3	)

Net income	$	260.2		$	214.4


Weighted average number of common shares outstanding during the period:
Basic		274.9			247.6
Diluted		277.9			249.3

Basic earnings per share:
Continuing operations	$	0.95		$	0.87
Discontinued operations		—			—
Net earnings		0.95			0.87

Diluted earnings per share:
Continuing operations	$	0.94		$	0.86
Discontinued operations		—			—
Net earnings		0.94			0.86


¹		Includes retail pharmacy co-payments of $1,662.6 million and $822.7 million for the three months ended March 31, 2010 and 2009, respectively.

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Changes in Stockholders’ Equity


	Number
	of Shares			Amount
								Accumulated
						Additional		Other
	Common			Common		Paid-in		Comprehensive		Retained		Treasury
(in millions)	Stock			Stock		Capital		Income		Earnings		Stock			Total
Balance at December 31, 2009		345.3		$	3.5	$	2,260.0	$	14.1	$	4,188.6	$	(2,914.4	)	$	3,551.8
Comprehensive income:
Net income		—			—		—		—		260.2		—			260.2
Other comprehensive income:
Foreign currency translation adjustment		—			—		—		3.9		—		—			3.9

Comprehensive income		—			—		—		3.9		260.2		—			264.1
Treasury stock acquired		—			—		—		—		—		(218.2	)		(218.2	)
Changes in stockholders’ equity related to employee stock plans		(0.2	)		—		23.0		—		—		26.3			49.3

Balance at March 31, 2010		345.1		$	3.5	$	2,283.0	$	18.0	$	4,448.8	$	(3,106.3	)	$	3,647.0

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Cash Flows


	Three Months Ended
	March 31,
(in millions)	2010			2009
Cash flows from operating activities:
Net income	$	260.2		$	214.4
Net loss from discontinued operations, net of tax		—			0.3

Net income from continuing operations		260.2			214.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		59.7			24.6
Deferred financing fees		1.3			0.6
Non-cash adjustments to net income		39.5			20.5
Changes in operating assets and liabilities:
Claims and rebates payable		(203.7	)		(15.3	)
Other net changes in operating assets and liabilities		603.8			41.3

Net cash provided by operating activities—continuing operations		760.8			286.4
Net cash used in operating activities—discontinued operations		—			(0.1	)

Net cash flows provided by operating activities		760.8			286.3


Cash flows from investing activities:
Purchases of property and equipment		(34.2	)		(13.6	)
Other		5.2			3.2

Net cash used in investing activities		(29.0	)		(10.4	)


Cash flows from financing activities:
Treasury stock acquired		(218.2	)		—
Repayment of long-term debt		(180.0	)		(80.0	)
Tax benefit relating to employee stock compensation		26.7			0.3
Net proceeds (cash used) from employee stock plans		10.7			(1.4	)

Net cash used in financing activities		(360.8	)		(81.1	)


Effect of foreign currency translation adjustment		1.7			(0.5	)

Net increase in cash and cash equivalents		372.7			194.3
Cash and cash equivalents at beginning of period		1,070.4			530.7

Cash and cash equivalents at end of period	$	1,443.1		$	725.0

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Summary of significant accounting policies

Our significant accounting policies, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted from this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, we believe the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading when read in conjunction with the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. For a full description of our accounting policies, refer to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2009.

We believe the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the Unaudited Consolidated Balance Sheet at March 31, 2010, the Unaudited Consolidated Statement of Operations for the three months ended March 31, 2010 and 2009, the Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2010, and the Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and 2009. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

Note 2 – Fair value measurements

Financial Accounting Standards Board (“FASB”) guidance regarding fair value measurement establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices for similar assets and liabilities in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Financial assets accounted for at fair value on a recurring basis at March 31, 2010 and December 31, 2009 include cash equivalents of $1,335.2 million and $909.8 million, restricted cash and investments of $10.0 million and $9.1 million, and trading securities of $12.0 million and $11.4 million (included in other assets), respectively. These assets are carried at fair value based on quoted market prices for identical securities (Level 1 inputs). Cash equivalents include investments in AAA-rated money market mutual funds with weighted average maturities of less than 90 days.

As of December 31, 2009, short-term investments included our investment in the Reserve Primary Fund (the “Primary Fund”), which is a money market fund. We recognized an unrealized loss of $2.0 million in the third quarter of 2008, when the net asset value of the Primary Fund decreased below $1 per share. We have received cash distributions from the Primary Fund totaling $48.7 million since the third quarter of 2008, including a $3.3 million receipt during the first quarter of 2010. Upon receipt of this cash distribution, we recognized a gain of $1.4 million, which is recorded in interest income, and reduced the net balance of the investment to zero. The estimated fair value of our investment in the Primary Fund was $1.9 million as of December 31, 2009. We assessed the fair value of the underlying collateral for the Primary Fund through evaluation of the liquidation value of assets held by the Primary Fund, which is classified within Level 3 of the fair value hierarchy.

The carrying value of cash and cash equivalents, accounts receivable, claims and rebates payable, and accounts payable approximated fair values due to the short-term maturities of these instruments. The fair value, which approximates the carrying value, of our bank credit facility was estimated using either quoted market prices or the current rates offered to us for debt with similar maturity. The carrying values and the fair values of our senior notes are shown in the following table:


	March 31, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
(in millions)	Amount		Value		Amount		Value

5.25% senior notes due 2012, net of unamortized discount	$	999.4	$	1,065.0	$	999.4	$	1,068.6
6.25% senior notes due 2014, net of unamortized discount		996.3		1,107.5		996.1		1,095.7
7.25% senior notes due 2019, net of unamortized discount		496.9		580.6		496.8		591.6

Total	$	2,492.6	$	2,753.1	$	2,492.3	$	2,755.9

The fair values of our senior notes were estimated based on quoted prices in active markets for identical securities (Level 1 inputs). In determining the fair value of liabilities, we took into consideration the risk of nonperformance. Nonperformance risk refers to the risk that the obligation will not be fulfilled and affects the value at which the liability would be transferred to a market participant. This risk did not have a material impact on the fair value of our liabilities.

Note 3 – Acquisition

On December 1, 2009, we completed the purchase of 100% of the shares and equity interests of certain subsidiaries of WellPoint, Inc. (“WellPoint”) that provide pharmacy benefit management services (“NextRx” or the “NextRx PBM Business”), in exchange for total consideration of $4.675 billion paid in cash, which is subject to a purchase price adjustment for working capital. The purchase price adjustment for working capital was finalized in the second quarter of 2010 and did not have a material impact. The NextRx PBM Business is a national provider of PBM services, and we believe the acquisition will enhance our ability to achieve cost savings, innovations, and operational efficiencies which will benefit our customers and stockholders. The purchase price was primarily funded through a $2.5 billion underwritten public offering of senior notes completed on June 9, 2009 resulting in net proceeds of $2,478.3 million, and a public offering of 26.45 million shares of common stock completed June 10, 2009 resulting in net proceeds of $1,569.1 million. This acquisition is reported as part of our PBM segment.

The parties have agreed to make an election under Section 338(h)(10) of the Internal Revenue Code with respect to the transaction which results in the goodwill and other intangibles generated being tax deductible over 15 years. We estimate the value of such election to us to be between $800 million and $1.2 billion dependent upon the discount factor and tax rate assumed. Additionally, at the closing of the acquisition, we entered into a 10-year contract with WellPoint (the “PBM agreement”) under which we will provide pharmacy benefits management services to WellPoint and its designated affiliates which were previously provided by NextRx. The services provided under the PBM Agreement include retail network pharmacy management, home delivery and specialty pharmacy services, drug formulary management, claims adjudication and other services consistent with those provided to other PBM clients.

The following unaudited pro forma information presents a summary of our combined results of operations and those of the NextRx PBM Business for the three months ended March 31, 2009 as if the acquisition and financing transactions had occurred at January 1, 2009, along with certain pro forma adjustments to give effect to amortization of other intangible assets, interest expense on acquisition debt and other adjustments. This information is presented with actual results from the three months ended March 31, 2010 for comparative purposes. The following pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the PBM business:


	Three Months Ended
	March 31,
*(in millions, except per share data)*	2010		2009

Total revenues	$	11,143.9	$	9,372.4
Net income from continuing operations		260.2		235.9
Basic earnings per share from continuing operations		0.95		0.86
Diluted earnings per share from continuing operations	$	0.94	$	0.86

The purchase price has been preliminarily allocated based upon the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition. Because information may become available within the measurement period (one year from the date of acquisition) which indicates a potential change to these valuations, the purchase price allocation is subject to change. The Company expects to finalize the allocation of the purchase price prior to or during the fourth quarter of 2010. The components of the preliminary purchase price allocation for NextRx are as follows:


Allocation of Purchase Price (in millions):

Current assets	$	937.0
Property and equipment		42.7
Acquired intangible assets		1,585.0
Goodwill		2,688.2
Liabilities assumed		(577.9	)

Total	$	4,675.0

The values of the tangible net assets in the above table are representative of the fair values of those assets and liabilities. The current assets of $937.0 million are primarily comprised of pharmaceutical manufacturer rebate receivables, which have historically experienced better collection rates than other customer trade receivables. As a result, the allowance for doubtful accounts related to these receivables is lower than our book of business average. The liabilities assumed of $577.9 million are primarily comprised of rebates payable to clients.

A portion of the excess of purchase price over tangible net assets acquired has been preliminarily allocated to intangible assets consisting of customer contracts in the amount of $1,585.0 million. These assets are included in other intangible assets on the unaudited consolidated balance sheet. The excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $2,688.2 million. The goodwill is the result of synergies derived from our ability to drive growth in generic and mail order utilization and supply chain savings from both drug manufacturers and the retail network.

Note 4 – Goodwill and other intangible assets

The following is a summary of our goodwill and other intangible assets (amounts in millions) for our two reportable segments PBM and Emerging Markets (“EM”):


			March 31, 2010							December 31, 2009
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Goodwill
PBM	$	5,474.4	$	(107.4	)	$	5,367.0	$	5,472.1	$	(107.3	)	$	5,364.8
EM		154.4		—			154.4		154.4		—			154.4

	$	5,628.8	$	(107.4	)	$	5,521.4	$	5,626.5	$	(107.3	)	$	5,519.2


Other intangible assets
PBM
Customer contracts	$	2,018.5	$	(235.0	)	$	1,783.5	$	2,018.3	$	(197.8	)	$	1,820.5
Other		27.9		(12.2	)		15.7		27.9		(10.9	)		17.0

		2,046.4		(247.2	)		1,799.2		2,046.2		(208.7	)		1,837.5


EM
Customer relationships		72.4		(31.5	)		40.9		72.4		(29.7	)		42.7
Other		2.4		—			2.4		2.4		—			2.4

		74.8		(31.5	)		43.3		74.8		(29.7	)		45.1

Total other intangible assets	$	2,121.2	$	(278.7	)	$	1,842.5	$	2,121.0	$	(238.4	)	$	1,882.6

The aggregate amount of amortization expense of other intangible assets for our continuing operations was $40.1 million and $9.3 million for the three months ended March 31, 2010 and 2009, respectively. In accordance with applicable accounting guidance, amortization for customer contracts related to the PBM agreement has been included as an offset to revenues in the amount of $28.5 million for the three months ended March 31, 2010. The future aggregate amount of amortization expense of other intangible assets for our continuing operations is expected to be approximately $159.7 million for 2010, $157.9 million for 2011, $157.1 million for 2012, $156.5 million for 2013, and $152.1 million for 2014. The weighted average amortization period of intangible assets subject to amortization is 15 years in total, and by major intangible class is 5 to 20 years for customer-related intangibles and 3 to 10 years for other intangible assets.

A summary of the change in the net carrying value of goodwill by business segment is shown in the following table:


(in millions)	PBM		EM		Total

Balance at December 31, 2009		5,364.8		154.4		5,519.2
Adjustment to purchase price allocation⁽¹⁾		1.5		—		1.5
Foreign currency translation and other		0.7		—		0.7

Balance at March 31, 2010	$	5,367.0	$	154.4	$	5,521.4


(1)		Represents adjustments to preliminary assignment of fair value to net assets acquired for NextRx.

See Note 3 for further information on goodwill related to recent acquisitions.

During the first quarter of 2010, we received notification of a client contract loss in one of our smaller EM lines of business. The client contract will remain in effect through December 31, 2010. As a result of this client loss, we reassessed carrying values of assets and liabilities in this business unit in the first quarter of 2010. We are currently assessing the strategic options for this business. Based on the assessment of these options, we have concluded that there was no goodwill impairment as of March 31, 2010. As circumstances change, we will continue to re-evaluate the fair value of the business' assets as compared to the carrying values and there still exists the possibility of an impairment charge in 2010. As of March 31, 2010, the total assets for this business were $39.8 million which includes goodwill and intangible assets of $23.8 million. During the annual impairment analysis in 2009, this reporting unit's fair value was in excess of its carrying value by approximately 100%.

During 2009, the valuations of two other reporting units in our EM segment yielded fair values which were less than 20% in excess of their carrying value and we concluded that no impairment existed since their fair value exceeded their carrying value. As of March 31, 2010, the total assets which include goodwill and the intangible assets of these two reporting units were approximately $370.0 million and $28.0 million, respectively. During the first quarter of 2010, there have been no events or circumstances relative to these reporting units that would require a re-evaluation of the fair value of the EM segment assets as compared to the carrying values. The fair value of both reporting units was determined using the income approach whereby estimated future discounted cash flows are used to develop fair value.

Note 5 – Earnings per share

Basic earnings per share (“EPS”) is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed in the same manner as basic earnings per share but adds the number of additional common shares that would have been outstanding for the period if the dilutive potential common shares had been issued. The following is the reconciliation between the number of weighted average shares used in the basic and diluted EPS calculations for all periods:


	Three Months Ended
	March 31,
(in millions)	2010⁽¹⁾		2009

Weighted average number of common shares outstanding during the period – Basic EPS⁽²⁾		274.9		247.6
Dilutive common stock equivalents:
Outstanding stock options, “stock-settled” stock appreciation rights (“SSRs”), restricted stock units, and executive deferred compensation units⁽²⁾		3.0		1.7

Weighted average number of common shares outstanding during the period – Diluted EPS⁽²⁾		277.9		249.3


(1)		The increase in weighted average number of common shares outstanding for the three months ended March 31, 2010 for Basic and Diluted EPS resulted from the 26.45 million shares issued in the common stock offering on June 10, 2009 (see Note 7).

(2)		Excludes awards of 1.4 million and 4.4 million for the three months ended March 31, 2010 and 2009, respectively. These were excluded because their effect was anti-dilutive.

The above shares are all calculated under the “treasury stock” method.

Note 6 – Financing

Long-term debt consists of:


	March 31,		December 31,
(in millions)	2010		2009

Term A loans due October 14, 2010 with an average interest rate of 0.9% at March 31, 2010	$	360.0	$	540.0
Term-1 loans due October 14, 2010 with an average interest rate of 0.8% at March 31, 2010		800.0		800.0
5.25% senior notes due 2012, net of unamortized discount		999.4		999.4
6.25% senior notes due 2014, net of unamortized discount		996.3		996.1
7.25% senior notes due 2019, net of unamortized discount		496.9		496.8
Revolving credit facility due October 14, 2010		—		—
Other		0.3		0.3

Total debt		3,652.9		3,832.6

Less current maturities		1,160.1		1,340.1

Long-term debt	$	2,492.8	$	2,492.5

At March 31, 2010 our credit facility includes $360.0 million of Term A loans, $800.0 million of Term-1 loans and a $600.0 million revolving credit facility. The revolving credit facility (none of which was outstanding as of March 31, 2010) is available for general corporate purposes. During the first three months of 2010, we made scheduled payments of $180.0 million on the Term A loan. We anticipate that the current cash balances and the cash flow from operations will be sufficient to re-pay the principal balances when due and make our scheduled payments for those contractual obligations and capital commitments included in our Annual Report on Form 10-K for the year ended December 31, 2009. While it is our current intention to re-pay these loans when due, we may enter into a new loan facility to provide additional liquidity. At March 31, 2010, our remaining Term A loans and Term-1 loans obligation is $1,160.0 million and our cash and cash equivalents are $1,443.1 million.

The credit facility requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin over LIBOR will range from 0.50% to 1.125%, depending on our consolidated leverage ratio or our credit rating. Under the credit facility we are required to pay commitment fees on the unused portion of the $600.0 million revolving credit facility. The commitment fee will range from 0.10% to 0.25% depending on our consolidated leverage ratio or our credit rating.

At March 31, 2010, the weighted average interest rate on the facility was 0.8%. The credit facility contains covenants which limit the indebtedness we may incur, the common shares we may repurchase, and dividends we may pay. The repurchase and dividend covenant applies if certain leverage thresholds are exceeded. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At March 31, 2010, we believe we were in compliance in all material respects with all covenants associated with our credit facility.

On June 9, 2009, we issued $2.5 billion of senior notes, including $1.0 billion aggregate principal amount of 5.25% senior notes due 2012; $1.0 billion aggregate principal amount of 6.25% senior notes due 2014 and $500 million aggregate principal amount of 7.25% senior notes due 2019. The senior notes require interest to be paid semi-annually on June 15and December 15. We may redeem some or all of each series of senior notes prior to maturity at a price equal to the greater of (1) 100% of the aggregate principal amount of any notes being redeemed, plus accrued and unpaid interest; or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, not including unpaid interest accrued to the redemption date, discounted to the redemption date on a semiannual basis at the treasury rate plus 50 basis points with respect to any 2012 notes, 2014 notes and 2019 notes being redeemed, plus in each case, unpaid interest on the notes being redeemed accrued to the redemption date. The senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by most of our current and future 100% owned domestic subsidiaries.

Financing costs of $13.3 million, for the issuance of the senior notes, are being amortized over an average weighted period of 5.2 years and are reflected in other intangible assets, net in the accompanying unaudited consolidated balance sheet. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business (see Note 3).

Note 7 – Common stock

On June 10, 2009, we completed a public offering of 26.45 million shares of common stock, which includes 3.45 million shares sold as a result of the underwriters’ exercise of their overallotment option in full at closing, at a price of $61.00 per share. The sale resulted in net proceeds of $1,569.1 million after giving effect to the underwriting discount and issuance costs of $44.4 million. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business (see Note 3).

Note 8 – Stock-based compensation plans

Under our stock-based compensation plans, we have issued stock options, stock-settled stock appreciation rights (“SSRs”), restricted stock awards, restricted stock units, and performance share awards. Awards are typically settled using treasury shares. The maximum contractual term of stock options and SSRs granted under the 2000 Long Term Incentive Plan (“LTIP”) is 10 years. Due to the nature of the awards, we use the same valuation methods and accounting treatments for SSRs and stock options. During the first three months of 2010, we granted 1,184,000 stock options with a weighted average fair market value of $31.95. The SSRs and stock options have three-year graded vesting.

During the first three months of 2010, we granted to certain officers and employees approximately 131,000 restricted stock units and performance shares with a weighted average fair market value of $98.99. The restricted stock units have three-year graded vesting and the performance shares cliff vest at the end of the three years. The number of performance shares that ultimately vest is dependent upon achieving specific performance targets. Prior to vesting, these shares are subject to forfeiture to us without consideration upon termination of employment under certain circumstances. The original value of the performance share grants is subject to a multiplier of 2.5 based on certain performance metrics. During the first quarter of 2010, approximately 106,000 additional performance shares were granted to certain officers for exceeding certain performance metrics. The total number of non-vested restricted stock and performance share awards was 530,000 at March 31, 2010 and 600,000 at December 31, 2009.

We recognized stock-based compensation expense of $11.9 million and $9.6 million in the three months ended March 31, 2010 and 2009, respectively. Unamortized stock-based compensation as of March 31, 2010 was $46.8 million for stock options and SSRs and $24.1 million for restricted stock and performance shares.

The fair value of options and SSRs granted is estimated on the date of grant using a Black-Scholes multiple option-pricing model with the following weighted average assumptions:


	Three Months Ended
	March 31,
	2010	2009

Expected life of option	3-5 years	3-5 years
Risk-free interest rate	1.3%-2.3%	1.3%-1.9%
Expected volatility of stock	37%-40%	35%-39%
Expected dividend yield	None	None

Note 9 – Contingencies

We accrue self-insurance reserves based upon estimates of the aggregate liability of claim costs in excess of our insurance coverage. Reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience. The majority of these claims are legal claims and our liability estimate is primarily related to the cost to defend these claims. We do not accrue for settlements, judgments, monetary fines or penalties until such amounts are probable and estimable. Under authoritative FASB guidance, if the range of possible loss is broad, the liability accrued should be based on the lower end of the range.

In the ordinary course of business there have arisen various legal proceedings, investigations or claims now pending against us or our subsidiaries. The effect of these actions on future financial results is not subject to reasonable estimation because considerable uncertainty exists about the outcomes.

While we believe our services and business practices are in compliance with applicable laws, rules and regulations in all material respects, we cannot predict the outcome of any such legal proceedings, investigations or claims at this time. An unfavorable outcome in one or more of these matters could result in the imposition of judgments, monetary fines or penalties, or injunctive or administrative remedies. We can give no assurance that such judgments, fines and remedies, and future costs associated with any such matters, would not have a material adverse effect on our financial condition, our consolidated results of operations or our consolidated cash flows.

Note 10 – Segment information

We report segments on the basis of services offered and have determined we have two reportable segments: PBM and EM. Our domestic and Canadian PBM operating segments have similar characteristics and as such have been aggregated into a single PBM reporting segment.

Operating income is the measure used by our chief operating decision maker to assess the performance of each of our operating segments. The following table presents information about our reportable segments for the three months ended March 31, 2010 and 2009.


*(in millions)*	PBM		EM		Total

For the three months ended March 31, 2010
Product revenue:
Network revenues⁽¹⁾	$	7,521.5	$	—	$	7,521.5
Home delivery and specialty revenues⁽²⁾		3,230.6		—		3,230.6
Other revenues		—		324.1		324.1

Service revenues		59.3		8.4		67.7

Total revenues		10,811.4		332.5		11,143.9
Depreciation and amortization expense		56.7		3.0		59.7
Operating income		450.6		3.5		454.1
Interest income						1.7
Interest expense						(42.8	)

Income before income taxes						413.0
Capital expenditures		33.5		0.7		34.2


For the three months ended March 31, 2009
Product revenue:
Network revenues⁽¹⁾	$	3,250.6	$	—	$	3,250.6
Home delivery and specialty revenues		1,797.8		—		1,797.8
Other revenues		—		300.0		300.0
Service revenues		64.1		10.3		74.4

Total revenues		5,112.5		310.3		5,422.8
Depreciation and amortization expense		21.4		3.2		24.6
Operating income		351.7		3.8		355.5
Interest income						0.9
Interest expense						(17.1	)

Income before income taxes						339.3
Capital expenditures		13.4		0.2		13.6


(1)		Includes retail pharmacy co-payments of $1,662.6 million and $822.7 million for the three months ended March 31, 2010 and 2009, respectively.

(2)		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.

The following table presents balance sheet information about our reportable segments:


(in millions)	PBM		EM		Total

As of March 31, 2010
Total assets	$	11,289.3	$	509.6	$	11,798.9
Investment in equity method investees		4.3		—		4.3

As of December 31, 2009
Total assets	$	11,560.3	$	370.9	$	11,931.2
Investment in equity method investees		4.1		—		4.1

PBM product revenue consists of revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks and revenues from the dispensing of prescription drugs from our home delivery and specialty pharmacies. EM product revenues consist of distribution of certain fertility drugs and revenues from drug distribution services.

PBM service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, market research programs, informed decision counseling services, and specialty distribution services. EM service revenue includes revenues from sample distribution, accountability services, and healthcare account administration.

Revenues earned by our Canadian PBM totaled $12.2 million and $10.8 million for the three months ended March 31, 2010 and 2009, respectively. All other revenues were earned in the United States. Long-lived assets of our Canadian PBM (consisting primarily of fixed assets) totaled $14.7 million and $15.2 million as of March 31, 2010 and December 31, 2009, respectively. All other long-lived assets are domiciled in the United States.

Note 11 – Condensed consolidating financial information

Our senior notes are jointly and severally and fully and unconditionally guaranteed by our 100% owned domestic subsidiaries, other than certain regulated subsidiaries including Express Scripts Insurance Company. The following condensed consolidating financial information has been prepared in accordance with the requirements for presentation of such information. Effective June 30, 2008, CuraScript Infusion Pharmacy, Inc. was sold. The assets, liabilities, and operations from this former subsidiary are included as discontinued operations in those of the non-guarantors. Subsequent to the acquisition of NextRx, the assets, liabilities and operations of the 100% owned domestic subsidiaries have been included in those of the guarantors. The following presents the condensed consolidating financial information separately for:

	(i)		Express Scripts, Inc. (the Parent Company), the issuer of the guaranteed obligations;

	(ii)		Guarantor subsidiaries, on a combined basis, as specified in the indentures related to Express Scripts’ obligations under the notes;

	(iii)		Non-guarantor subsidiaries, on a combined basis;

	(iv)		Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries; and

	(v)		Express Scripts, Inc. and subsidiaries on a consolidated basis.

Condensed Consolidating Balance Sheet


	Express					Non-
(in millions)	Scripts, Inc.			Guarantors		Guarantors			Eliminations			Consolidated
As of March 31, 2010
Cash and cash equivalents	$	1,333.3		$	40.7	$	69.1		$	—		$	1,443.1
Restricted cash and investments		—			8.4		1.6			—			10.0
Receivables, net		1,249.0			861.7		10.6			—			2,121.3
Other current assets		98.5			362.9		3.8			—			465.2

Current assets	$	2,680.8		$	1,273.7	$	85.1		$	—		$	4,039.6

Property and equipment, net		239.9			112.5		10.5			—			362.9
Investments in subsidiaries		6,038.2			—		—			(6,038.2	)		—
Intercompany		(2,863.6	)		2,960.5		(96.9	)		—			—
Goodwill		2,940.6			2,555.2		25.6			—			5,521.4
Other intangible assets, net		1,513.5			324.8		4.2			—			1,842.5
Other assets		21.8			8.7		2.0			—			32.5

Total assets	$	10,571.2		$	7,235.4	$	30.5		$	(6,038.2	)	$	11,798.9


Claims and rebates payable	$	2,181.5		$	465.5	$	—		$	—		$	2,647.0
Accounts payable		703.4			30.4		3.0			—			736.8
Accrued expenses		306.6			331.9		7.1			—			645.6
Current maturities of long-term debt		1,160.0			0.1		—			—			1,160.1

Current liabilities	$	4,351.5		$	827.9	$	10.1		$	—		$	5,189.5

Long-term debt		2,492.8			—		—			—			2,492.8
Other liabilities		79.9			378.0		11.7			—			469.6
Stockholders’ equity		3,647.0			6,029.5		8.7			(6,038.2	)		3,647.0

Total liabilities and stockholders’ equity	$	10,571.2		$	7,235.4	$	30.5		$	(6,038.2	)	$	11,798.9


As of December 31, 2009
Cash and cash equivalents	$	1,005.0		$	10.0	$	55.4		$	—		$	1,070.4
Restricted cash and investments		—			7.5		1.6			—			9.1
Receivables, net		1,179.8			1,331.5		9.9			—			2,521.2
Other current assets		196.0			341.2		5.6			—			542.8

Current assets	$	2,380.8		$	1,690.2	$	72.5		$	—		$	4,143.5

Property and equipment, net		239.6			103.5		11.0			—			354.1
Investments in subsidiaries		5,970.2			—		—			(5,970.2	)		—
Intercompany		(2,387.2	)		2,467.5		(80.3	)		—			—
Goodwill		2,939.2			2,555.2		24.8			—			5,519.2
Other intangible assets, net		1,543.9			334.4		4.3			—			1,882.6
Other assets		21.3			8.6		1.9			—			31.8

Total assets	$	10,707.8		$	7,159.4	$	34.2		$	(5,970.2	)	$	11,931.2


Claims and rebates payable	$	2,264.3		$	586.4	$	—		$	—		$	2,850.7
Accounts payable		674.4			29.5		3.0			—			706.9
Accrued expenses		312.7			228.4		11.3			—			552.4
Current maturities of long-term debt		1,340.0			0.1		—			—			1,340.1
Current liabilities of discontinued operations		—			—		6.7			—			6.7

Current liabilities	$	4,591.4		$	844.4	$	21.0		$	—		$	5,456.8

Long-term debt		2,492.5			—		—			—			2,492.5
Other liabilities		72.1			356.3		1.7			—			430.1
Stockholders’ equity		3,551.8			5,958.7		11.5			(5,970.2	)		3,551.8

Total liabilities and stockholders’ equity	$	10,707.8		$	7,159.4	$	34.2		$	(5,970.2	)	$	11,931.2

Condensed Consolidating Statement of Operations


	Express						Non-
(in millions)	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated
For the three months ended March 31, 2010
Revenues	$	7,394.5		$	3,728.2		$	21.2		$	—		$	11,143.9
Operating expenses		7,051.6			3,614.0			24.2			—			10,689.8

Operating income (loss)		342.9			114.2			(3.0	)		—			454.1
Interest expense, net		(39.6	)		(1.5	)		—			—			(41.1	)

Income (loss) before income taxes		303.3			112.7			(3.0	)		—			413.0
Provision for income taxes		110.3			42.5			—			—			152.8

Net income (loss) from continuing operations		193.0			70.2			(3.0	)		—			260.2
Equity in earnings of subsidiaries		67.2			—			—			(67.2	)		—

Net income (loss)	$	260.2		$	70.2		$	(3.0	)	$	(67.2	)	$	260.2


For the three months ended March 31, 2009
Revenues	$	3,169.5		$	2,236.2		$	17.1		$	—		$	5,422.8
Operating expenses		2,901.3			2,151.8			14.2			—			5,067.3

Operating income		268.2			84.4			2.9			—			355.5
Interest expense, net		(13.5	)		(2.2	)		(0.5	)		—			(16.2	)

Income before income taxes		254.7			82.2			2.4			—			339.3
Provision for income taxes		92.4			31.3			0.9			—			124.6

Net income from continuing operations		162.3			50.9			1.5			—			214.7
Net loss from discontinued operations, net of tax		—			—			(0.3	)		—			(0.3	)
Equity earnings of subsidiaries		52.1			—			—			(52.1	)		—

Net income (loss)	$	214.4		$	50.9		$	1.2		$	(52.1	)	$	214.4

Condensed Consolidating Statement of Cash Flows


	Express						Non-
	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated

For the three months ended March 31, 2010
Net cash flows provided by (used in) operating activities	$	291.3		$	537.4		$	(0.7	)	$	(67.2	)	$	760.8


Cash flows from investing activities:
Purchase of property and equipment		(17.7	)		(16.4	)		(0.1	)		—			(34.2	)
Other		3.3			(1.1	)		3.0			—			5.2

Net cash (used in) provided by investing activities		(14.4	)		(17.5	)		2.9			—			(29.0	)


Cash flows from financing activities:
Treasury stock acquired		(218.2	)		—			—			—			(218.2	)
Repayment of long-term debt		(180.0	)		—			—			—			(180.0	)
Tax benefit relating to employee stock compensation		26.7			—			—			—			26.7
Net proceeds from employee stock plans		10.7			—			—			—			10.7
Net transactions with parent		412.2			(489.2	)		9.8			67.2			—

Net cash provided by (used in) financing activities		51.4			(489.2	)		9.8			67.2			(360.8	)


Effect of foreign currency translation adjustment		—			—			1.7			—			1.7


Net increase in cash and cash equivalents		328.3			30.7			13.7			—			372.7
Cash and cash equivalents at beginning of period		1,005.0			10.0			55.4			—			1,070.4

Cash and cash equivalents at end of period	$	1,333.3		$	40.7		$	69.1		$	—		$	1,443.1

Condensed Consolidating Statement of Cash Flows


	Express						Non-
	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated

For the three months ended March 31, 2009
Net cash flows provided by (used in) operating activities	$	221.2		$	116.9		$	0.3		$	(52.1	)	$	286.3


Cash flows from investing activities:
Purchase of property and equipment		(12.1	)		(0.8	)		(0.7	)		—			(13.6	)
Other		3.2			—			—			—			3.2

Net cash used in investing activities		(8.9	)		(0.8	)		(0.7	)		—			(10.4	)


Cash flows from financing activities:
Repayment of long-term debt		(80.0	)		—			—			—			(80.0	)
Tax benefit relating to employee stock compensation		0.3			—			—			—			0.3
Net proceeds from employee stock plans		(1.4	)		—			—			—			(1.4	)
Net transactions with parent		50.8			(104.2	)		1.3			52.1			—

Net cash (used in) provided by financing activities		(30.3	)		(104.2	)		1.3			52.1			(81.1	)


Effect of foreign currency translation adjustment		—			—			(0.5	)		—			(0.5	)


Net increase in cash and cash equivalents		182.0			11.9			0.4			—			194.3
Cash and cash equivalents at beginning of period		488.1			8.9			33.7			—			530.7

Cash and cash equivalents at end of period	$	670.1		$	20.8		$	34.1		$	—		$	725.0


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information we have included or incorporated by reference in this Quarterly Report on Form 10-Q, and information which may be contained in our other filings with the Securities and Exchange Commission (the “SEC”) and our press releases or other public statements, contain or may contain forward-looking statements. These forward-looking statements include, among others, statements of our plans, objectives, expectations (financial or otherwise) or intentions.

Our forward-looking statements involve risks and uncertainties. Our actual results may differ significantly from those projected or suggested in any forward-looking statements. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Factors which might cause such a difference to occur include, but are not limited to:

	•		uncertainties associated with our acquisitions, which include integration risks and costs, uncertainties associated with client retention and repricing of client contracts, and uncertainties associated with the operations of acquired businesses

	•		results in regulatory matters, the adoption of new legislation or regulations (including new healthcare reform proposals and increased costs associated with compliance with new laws and regulations), more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations

	•		continued pressure on margins resulting from client demands for lower prices or different pricing approaches, enhanced service offerings and/or higher service levels

	•		competition in the PBM industry, and our ability to consummate contract negotiations with prospective clients, as well as competition from new competitors offering services that may in whole or in part replace services that we now provide to our customers

	•		the possible loss, or adverse modification of the terms, of contracts with pharmacies in our retail pharmacy network

	•		the possible termination or nonrenewal of, or unfavorable modification to, contracts with key clients or providers, some of which could have a material impact on our financial results

	•		costs and uncertainties of adverse results in litigation, including a number of pending class action cases that challenge certain of our business practices

	•		our leverage and debt service obligations, including the effect of certain covenants in our borrowing agreements, access to capital and increases in interest rates

	•		our ability to maintain growth rates, or to control operating or capital costs, including the impact of declines in prescription drug utilization resulting from the current economic environment

	•		changes and other uncertainties related to industry pricing benchmarks, which could have the effect of reducing prices and margins, or which could otherwise create turbulence within the industry

	•		increased compliance risk relating to our contracts with the Department of Defense (“DoD”) TRICARE Management Activity and various state governments and agencies

	•		uncertainties and risks regarding the Medicare Part D prescription drug benefit, including the financial impact to us to the extent we participate in the program on a risk-bearing basis, uncertainties of client or member losses to other providers under Medicare Part D, implementation of regulations that adversely affect our profitability or cash flow, and increased regulatory risk

	•		the possible loss, or adverse modification of the terms, of relationships with pharmaceutical manufacturers or distributors, or changes in pricing, discount or other practices of pharmaceutical manufacturers or interruption of the supply of any pharmaceutical products

	•		in connection with our specialty pharmacy business, the possible loss, or adverse modification of the terms of our contracts with a limited number of biopharmaceutical companies from whom we acquire specialty pharmaceuticals

	•		the use and protection of the intellectual property, data, and tangible assets that we use in our business, the misuse of our data by others, or infringement or alleged infringement by us of intellectual property claimed by others

	•		general developments in the health care industry, including the impact of increases in health care costs, government programs to control health care costs, changes in drug utilization and cost patterns and introductions of new drugs

	•		increase in credit risk relative to our clients due to adverse economic trends or other factors

	•		other risks described from time to time in our filings with the SEC

See the more comprehensive description of risk factors under the captions “Forward Looking Statements and Associated Risks” contained in Item 1 – “Business” and Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 24, 2010.

OVERVIEW

As one of the largest full-service pharmacy benefit management (“PBM”) companies in North America, we provide healthcare management and administration services on behalf of our clients, which include health maintenance organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans, and government health programs. Our integrated PBM services include network claims processing, home delivery services, patient care and direct specialty home delivery to patients, benefit design consultation, drug utilization review, formulary management, drug data analysis services, distribution of injectable drugs to patient homes and physicians’ offices, bio-pharma services, and fulfillment of prescriptions to low-income patients through manufacturer-sponsored patient assistance programs and company-sponsored generic patient assistance programs.

Through our Emerging Markets (“EM”) segment, we provide services including: distribution of pharmaceuticals and medical supplies to providers and clinics, distribution of sample units to physicians and verification of practitioner licensure, fertility services to providers and patients, healthcare account administration and implementation of consumer-directed healthcare solutions.

Revenue generated by our segments can be classified as either tangible product revenue or service revenue. We earn tangible product revenue from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks and from dispensing prescription drugs from our home delivery and specialty pharmacies. Service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, medication counseling services, certain specialty distribution services, and sample fulfillment and accountability services. Tangible product revenue generated by our PBM and EM segments represented 99.4% of revenues for the three months ended March 31, 2010 and 98.6% for the same period of 2009.

EXECUTIVE SUMMARY AND TREND FACTORS AFFECTING THE BUSINESS

Our results in the first three months of 2010 reflect the successful execution of our business model, which emphasizes the alignment of our financial interests with those of our clients through greater use of generics and low-cost brands, home delivery and specialty pharmacy. In the first three months of 2010, we benefited from better management of ingredient costs through renegotiation of supplier contracts, increased competition among generic manufacturers, higher generic fill rate (70.2% compared to 67.7% in the same period of 2009) and other actions which helped to reduce ingredient costs. In addition, through the research performed by us and guided by our Center for Cost-Effective Consumerism, we are providing our clients with additional tools designed to generate higher generic fill rates and further increase the use of our home delivery and specialty pharmacy services and drive greater adherence.

While we believe we are well positioned from a business and financial perspective, we are subject to the current adverse economic environment. These conditions could affect our business in a number of direct and indirect ways.

We believe the purchase of the shares and equity interests of certain subsidiaries of WellPoint that provide pharmacy benefit management services (“NextRx”, or the “NextRx PBM Business”), as well as the positive trends in gross profit we saw in the first three months of 2010 should continue to generate improvements in our results of operations in the future. We benefited from lower drug purchasing costs and increased generic usage which we believe should continue to offset the negative impact of various economic and marketplace forces affecting pricing and plan structure.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates and assumptions are based upon a combination of historical information and various other assumptions believed to be reasonable under the particular circumstances. Actual results may differ from our estimates. For a full description of our critical accounting policies, please refer to the “MDA – Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 24, 2010.

CLIENTS

We entered into new long-term contracts with WellPoint and the DoD in the fourth quarter of 2009. As a result, we have a higher concentration of revenues among these clients in the first quarter of 2010. For the first quarter of 2010, our top five clients collectively represented 53.2% of revenues. Our two largest clients, WellPoint and the DoD, represented approximately $3,128.6 million and $2,088.9 million, or 28.1% and 18.7% of revenues, respectively. None of our other clients accounted for 10% or more of our consolidated revenues during the first quarter of 2010. There were no clients that accounted for 10% or more of our consolidated revenues over the same period of 2009.

RESULTS OF OPERATIONS

PBM OPERATING INCOME


	Three Months Ended
	March 31,
(in millions)	2010		2009

Product revenues
Network revenues⁽¹⁾	$	7,521.5	$	3,250.6
Home delivery and specialty revenues⁽²⁾		3,230.6		1,797.8
Service revenues		59.3		64.1

Total PBM revenues		10,811.4		5,112.5
Cost of PBM revenues⁽¹⁾		10,160.9		4,593.1

PBM gross profit		650.5		519.4
PBM SG&A expenses		199.9		167.7

PBM operating income	$	450.6	$	351.7


Network		149.0		94.2
Home delivery and specialty⁽²⁾		13.3		10.5

Total PBM Claims		162.3		104.7

Total adjusted PBM Claims⁽³⁾		186.5		124.0


(1)		Includes retail pharmacy co-payments of $1,662.6 million and $822.7 million for the three months ended March 31, 2010 and 2009, respectively.

(2)		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.

(3)		Total adjusted claims reflect home delivery claims multiplied by 3, as home delivery claims are typically 90 day claims.

Product Revenues for the three months ended March 31, 2010: Network pharmacy revenues increased by $4,270.9 million, or 131.4%, in the three months ended March 31, 2010 over the same period of 2009. Home delivery and specialty revenues increased $1,432.8 million, or 79.7%, in the three months ended March 31, 2010 from the same period in 2009. Approximately $5,515.4 million of the total product revenue increase is due to an increase in volume mostly due to the acquisition of NextRx and the new contract with the DoD. The new contract with the DoD results in our accounting using the gross basis, under which the ingredient cost and member co-payments are included in revenues and cost of revenues. The additional increase in product revenues was due to increases in volume due to new clients as well as increases in price. The increase was partially offset by the impact of higher generic penetration. Our network generic fill rate increased to 71.3% of total network claims in the first quarter of 2010 as compared to 69.0% in the same period of 2009. Additionally, our home delivery generic fill rate increased to 59.4% of home delivery claims in the three months ended March 31, 2010 as compared to 56.9% in the same period of 2009.

Cost of PBM revenues increased $5,567.8 million, or 121.2%, in the three months ended March 31, 2010 from the same period of 2009 due primarily to the acquisition of NextRx and the new contract with the DoD.

Our PBM gross profit increased $131.1 million, or 25.2%, for the three months ended March 31, 2010 as compared to the same period of 2009. The acquisition of NextRx as well as better management of ingredient costs and client cost savings from the increase in the aggregate generic fill rate were partially offset by margin pressures arising from ingredient cost inflation and the current competitive environment.

Selling, general and administrative expense (“SG&A”) for our PBM segment for the three months ended March 31, 2010 increased by $32.2 million, or 19.2%, as compared to the same period of 2009 primarily as a result of the following factors:

	•		Increases in employee compensation of $14.4 million due to growth as a result of the acquisition of NextRx,

	•		Costs of $10.2 million to improve technological infrastructure which enhances product and services capabilities; along with other strategic initiatives,

	•		Integration costs of $6.0 million related to the acquisition of NextRx.

PBM operating income increased $98.9 million, or 28.1%, for the three months ended March 31, 2010 as compared to the same period of 2009, based on the various factors described above.

EM OPERATING INCOME


	Three Months Ended
	March 31,
(in millions)	2010		2009

Product revenues	$	324.1	$	300.0
Service revenues		8.4		10.3

Total EM revenues		332.5		310.3
Cost of EM revenues		318.0		295.6

EM gross profit		14.5		14.7
EM SG&A expenses		11.0		10.9

EM operating income	$	3.5	$	3.8

EM Continuing Operations: EM revenues increased $22.2 million, or 7.2%, in the three months ended March 31, 2010 over the same period of 2009. The increase in revenue is primarily due to increases in volume in certain segments of our distribution line of business as well as strong demand by clients in our fertility line of business.

EM cost of revenues increased $22.4 million, or 7.6%, in the three months ended March 31, 2010 over the same period of 2009 primarily due to increases in volume and cost inflation in our distribution line of business. This resulted in a decrease in gross profit of $0.2 million, or 1.4%, in the three months ended March 31, 2010 over the same period in 2009 as we experience margin pressure in our distribution line of business.

SG&A for our EM segment remained relatively constant in the three months ended March 31, 2010 over the same period of 2009.

EM income from continuing operations decreased by $0.3 million, or 7.9%, for the three months ended March 31, 2010 from the same period of 2009 based on the factors described above.

OTHER (EXPENSE) INCOME

Net interest expense increased $24.9 million in the three months ended March 31, 2010 as compared to the same period in 2009 primarily due to the additional interest expense we incurred for the debt issuance in 2009 (see “Liquidity and Capital Resources”), partially offset by a lower weighted average interest rate and lower debt outstanding under our credit facility (see Note 6 – Financing).

PROVISION FOR INCOME TAXES

Our effective tax rate from continuing operations increased to 37.0% for the first quarter of 2010 from 36.7% for the same period of 2009 primarily due to increased state income tax liability from the acquisition of NextRx.

NET INCOME AND EARNINGS PER SHARE

Net income for the three months ended March 31, 2010 increased $45.8 million, or 21.4%, over the same period of 2009 due to factors discussed above.

Additionally, basic and diluted earnings per share increased 9.2% and 9.3%, respectively, for the three months ended March 31, 2010 over the same period of 2009 primarily due to operating results partially offset by an increase in shares outstanding as a result of the public offering in June 2009 (see Note 7).

LIQUIDITY AND CAPITAL RESOURCES

OPERATING CASH FLOW, CAPITAL EXPENDITURES AND FINANCING

For the three months ended March 31, 2010, net cash provided by continuing operations increased $474.5 million to $760.8 million. Changes in operating cash flows were positively impacted by the following factors:

	•		Net income increased $45.8 million in the three months ended March 31, 2010 compared to the same period of 2009.

	•		Included in net income in the three months ended March 31, 2010 is $59.7 million related to depreciation and amortization.

	•		The deferred tax provision increased $17.5 million in the three months ended March 31, 2010 compared to the same period of 2009 reflecting a net change in taxable temporary differences primarily attributable to tax deductible goodwill.

	•		Changes in working capital resulted in cash inflow of $400.1 million in the three months ended March 31, 2010 compared to $26.0 million over the same period of 2009. The cashflow increase was primarily related to the collection of receivables from pharmaceutical manufacturers and clients due to the acquisition of NextRx. Offsetting these net cash inflows are net cash outflows of $188.4 million from claims and rebates payable due to the timing of invoices and payments.

Our capital expenditures for the three months ended March 31, 2010 increased $20.6 million compared to the same period of 2009. In the fourth quarter of 2009, construction began on our new Technology & Innovation Center in St. Louis, Missouri. Capital expenditures related to this facility were $20.4 million in the first quarter of 2010. We intend to continue to invest in infrastructure and technology that we believe will provide efficiencies in operations and facilitate growth and enhance the service we provide to our clients. Anticipated capital expenditures will be funded primarily from operating cash flow or, to the extent necessary, with borrowings under our revolving credit facility, discussed below.

INVESTMENTS

As of December 31, 2009, short-term investments included our investment in the Reserve Primary Fund (the “Primary Fund’), which is a money market fund. We recognized an unrealized loss of $2.0 million in the third quarter of 2008, when the net asset value of the Primary Fund decreased below $1 per share. We have received cash distributions from the Primary Fund totaling $48.7 million since the third quarter of 2008, including a $3.3 million receipt during the first quarter of 2010. Upon receipt of this cash distribution, we recognized a gain of $1.4 million, which is recorded in interest income, and reduced the net balance of the investment to zero. The estimated fair value of our investment in the Primary Fund was $1.9 million as of December 31, 2009. We assessed the fair value of the underlying collateral for the Primary Fund through evaluation of the liquidation value of assets held by the Primary Fund, which is classified within Level 3 of the fair value hierarchy.

CHANGES IN BUSINESS

We regularly review potential acquisitions and affiliation opportunities. We believe available cash resources, bank financing or the issuance of additional common stock could be used to finance future acquisitions or affiliations. There can be no assurance we will make new acquisitions or establish new affiliations in 2010 or thereafter.

STOCK REPURCHASE PROGRAM

We have a stock repurchase program, originally announced on October 25, 1996. Treasury shares are carried at first in, first out cost. There is no limit on the duration of the program. During the three months ended March 31, 2010, we repurchased 2.2 million treasury shares for $218.2 million. Current year repurchases were funded through internally generated cash. There are 18.8 million shares remaining under this program. Additional share repurchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions and other factors.

BANK CREDIT FACILITY

Our credit facility requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin over LIBOR will range from 0.50% to 1.125%, depending on our consolidated leverage ratio or our credit rating. Under our credit facility, we are required to pay commitment fees on the unused portion of the $600.0 million revolving credit facility. The commitment fee will range from 0.10% to 0.25% depending on our consolidated leverage ratio or our credit rating.

At March 31, 2010, the weighted average interest rate on the facility was 0.8%. Our credit facility contains covenants that limit the indebtedness we may incur, the common shares we may repurchase, and dividends we may pay. The repurchase and dividend covenant applies if certain leverage thresholds are exceeded. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At March 31, 2010, we believe we were in compliance in all material respects with all covenants associated with our credit facility.

SENIOR NOTES

On June 9, 2009, we issued $2.5 billion of senior notes, including $1.0 billion aggregate principal amount of 5.25% senior notes due 2012; $1.0 billion aggregate principal amount of 6.25% senior notes due 2014 and $500 million aggregate principal amount of 7.25% senior notes due 2019. The senior notes require interest to be paid semi-annually on June 15and December 15. We may redeem some or all of each series of senior notes prior to maturity at a price equal to the greater of (1) 100% of the aggregate principal amount of any notes being redeemed, plus accrued and unpaid interest; or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, not including unpaid interest accrued to the redemption date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus 50 basis points with respect to any 2012 notes, 2014 notes and 2019 notes being redeemed, plus in each case, unpaid interest on the notes being redeemed accrued to the redemption date. The senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by most of our current and future 100% owned domestic subsidiaries.

Financing costs of $13.3 million are being amortized over an average weighted period of 5.2 years and are reflected in other intangible assets, net in the unaudited consolidated balance sheet. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business.

COMMON STOCK

IMPACT OF INFLATION

Changes in prices charged by manufacturers and wholesalers for pharmaceuticals affect our revenues and cost of revenues. Most of our contracts provide that we bill clients based on a generally recognized price index for pharmaceuticals.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in interest rates related to debt outstanding under our credit facility. Our earnings are subject to change as a result of movements in market interest rates. At March 31, 2010 we had no obligations net of cash, which were subject to variable rates of interest under our credit facility.


Item 4.		Controls and Procedures

We maintain a comprehensive set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) designed to provide reasonable assurance that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chairman, President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective in providing reasonable assurance of the achievement of the objectives described above.

During the first quarter ended March 31, 2010, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.		Legal Proceedings

We and/or our subsidiaries are defendants in a number of lawsuits. Each case seeks damages in an unspecified amount. We cannot ascertain with any certainty at this time the monetary damages or injunctive relief that any of the plaintiffs may seek to recover. We also cannot provide any assurance that the outcome of any of these matters, or some number of them in the aggregate, will not be materially adverse to our financial condition, consolidated results of operations, cash flows or business prospects. In addition, the expenses of defending these cases may have a material adverse effect on our financial results.

Additional information regarding such matters is contained in Item 3 – Legal Proceedings in our Annual Report on Form 10-K for the year ended December 31, 2009. There are no new material developments since the filing of our Form 10-K.

In addition, in the ordinary course of our business there have arisen various legal proceedings, investigations or claims now pending against our subsidiaries and us. The effect of these actions on future financial results is not subject to reasonable estimation because considerable uncertainty exists about the outcomes. Where insurance coverage is not available for such claims, or in our judgment, is not cost-effective, we maintain self-insurance reserves to reduce our exposure to future legal costs, settlements and judgments related to uninsured claims. Our self-insured reserves are based upon estimates of the aggregate liability for the costs of uninsured claims incurred and the retained portion of insured claims using certain actuarial assumptions followed in the insurance industry and our historical experience. It is not possible to predict with certainty the outcome of these claims, and we can give no assurance that any losses in excess of our insurance and any self-insurance reserves will not be material.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

The following is a summary of our stock repurchasing activity during the three months ended March 31, 2010 (share data in millions):


					Total number of
					shares purchased		Maximum number
	Total number				as part of a		of shares
	of		Average		publicly		that may yet be
	shares		price paid		announced		purchased under
Period	purchased		per share		program		the program

1/1/2010 – 1/31/2010		—	$	—		—		21.0
2/1/2010 – 2/28/2010		—		—		—		21.0
3/1/2010 – 3/31/2010		2.2		98.30		2.2		18.8

First Quarter 2010 Total		2.2	$	98.30		2.2


Item 6.		Exhibits

(a) See Index to Exhibits below.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	EXPRESS SCRIPTS, INC. (Registrant)
Date: April 28, 2010	By:	/s/ George Paz
		George Paz, Chairman, President and Chief Executive Officer

Date: April 28, 2010	By:	/s/ Jeffrey Hall
		Jeffrey Hall, Executive Vice President and
		Chief Financial Officer

INDEX TO EXHIBITS
(Express Scripts, Inc. – Commission File Number 0-20199)


Exhibit
Number		Exhibit
2.1		Stock and Interest Purchase Agreement dated April 9, 2009 between the Company and WellPoint, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed April 14, 2009.

3.1		Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ending December 31, 2009 filed February 24, 2010.

3.2¹		Third Amended and Restated Bylaws, as amended.

4.1		Form of Certificate for Common Stock, incorporated by reference to Exhibit No. 4.1 to the Company’s Registration Statement on Form S-1 filed June 9, 1992 (No. 33-46974) (the “Registration Statement”).

4.2		Rights Agreement dated as of July 25, 2001 between the Company and American Stock Transfer & Trust Company, as Rights Agent, which includes the Certificate of Designations for the Series A Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C, incorporated by reference to Exhibit No. 4.1 to the Company’s Current Report on Form 8-K filed July 31, 2001 (the “Rights Agreement”).

4.3		Amendment No. 1 to the Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated May 25, 2005, incorporated by reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K filed May 31, 2005.

4.4		Amendment No. 2 to the Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated December 18, 2009, incorporated by reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K filed December 18, 2009.

4.5		Indenture, dated as of June 9, 2009, among the Company, the Subsidiary Guarantors party thereto and Union Bank, N.A., as Trustee, incorporated by reference to Exhibit No. 4.1 to the Company’s Current Report on Form 8-K filed June 10, 2009.

4.6		First Supplemental Indenture, dated as of June 9, 2009, among the Company, the Subsidiary Guarantors party thereto and Union Bank, N.A., as Trustee, related to the 5.25% senior notes due in 2012, incorporated by reference to Exhibit No. 4.2 to the Company’s Current Report on Form 8-K filed June 10, 2009.

4.7		Second Supplemental Indenture, dated as of June 9, 2009, among the Company, the Subsidiary Guarantors party thereto and Union Bank, N.A., as Trustee, related to the 6.25% senior notes due in 2014, incorporated by reference to Exhibit No. 4.3 to the Company’s Current Report on Form 8-K filed June 10, 2009.

4.8		Third Supplemental Indenture, dated as of June 9, 2009, among the Company, the Subsidiary Guarantors party thereto and Union Bank, N.A., as Trustee, related to the 7.25% senior notes due in 2019, incorporated by reference to Exhibit No. 4.4 to the Company’s Current Report on Form 8-K filed June 10, 2009.

11.1		Statement regarding computation of earnings per share. (See Note 5 to the unaudited consolidated financial statements.)

31.1¹		Certification by George Paz, as Chairman, President and Chief Executive Officer of Express Scripts, Inc., pursuant to Exchange Act Rule 13a-14(a).

31.2¹		Certification by Jeffrey Hall, as Executive Vice President and Chief Financial Officer of Express Scripts, Inc., pursuant to Exchange Act Rule 13a-14(a).

32.1¹		Certification by George Paz, as Chairman, President and Chief Executive Officer of Express Scripts, Inc., pursuant to 18 U.S.C. § 1350 and Exchange Act Rule 13a-14(b).


Exhibit
Number		Exhibit
32.2¹		Certification by Jeffrey Hall, as Executive Vice President and Chief Financial Officer of Express Scripts, Inc., pursuant to 18 U.S.C. § 1350 and Exchange Act Rule 13a-14(b).

101.1²		XBRL Taxonomy Instance Document.

101.2²		XBRL Taxonomy Extension Schema Document.

101.3²		XBRL Taxonomy Extension Calculation Linkbase Document.

101.4²		XBRL Taxonomy Extension Definition Linkbase Document.

101.5²		XBRL Taxonomy Extension Label Linkbase Document.

101.6²		XBRL Taxonomy Extension Presentation Linkbase Document.


1		Filed herein.

2		Furnished, not filed.

EX-3.2 2 c57451exv3w2.htm EX-3.2 exv3w2

Exhibit 3.2

THIRD AMENDED AND RESTATED

BYLAWS

EXPRESS SCRIPTS, INC.

Adopted November 21, 2000
(as amended February 6, 2001)
(as further amended May 26, 2004)
(as further amended December 15, 2004)
(as further amended December 18, 2009)
(as further amended March 3, 2010)

1. MEETINGS OF STOCKHOLDERS.

1.1 Annual Meeting. The annual meeting of stockholders shall be held on the date and at the time fixed from time to time by the board of directors (the “Board”), provided, that each successive annual meeting shall be held on the fourth Wednesday in May of each year if not a legal holiday, and if a legal holiday then on the next succeeding day not a legal holiday, or on such other date or time and at such place as may be determined from time to time by resolutions adopted by the Board.

1.2 Special Meetings. Subject to the rights of the holders of any series of preferred stock under the Certificate of Incorporation, as amended, of the corporation (the “Certificate of Incorporation”), special meetings of the stockholders may be called by the chairman of the Board or the chief executive officer or by resolution of the Board. Only business related to the purposes set forth in the notice of the meeting may be transacted at a special meeting.

1.3 Place and Time of Meetings. Meetings of the stockholders may be held in or outside Delaware at the place and time specified by the Board; provided that the Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “General Corporation Law of Delaware”).

1.4 Notice of Meeting; Waiver of Notice. (a) Written or printed notice of each meeting of stockholders shall be given by or at the direction of the secretary or the chief executive officer of the corporation to each stockholder entitled to vote at the meeting, except that (a) it shall not be necessary to give notice to any stockholder who properly waives notice before or after the meeting, whether in writing or by electronic transmission or otherwise, and (b) no notice of an adjourned meeting need be given except when required under Section 1.6 of

these Bylaws or by law. Each notice of a meeting shall be given, personally or by mail or, as provided below, by means of electronic transmission, not less than ten (10) nor more than sixty (60) days before the meeting and shall state the time and place of the meeting, or if held by remote communications, the means of remote communication by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and unless it is the annual meeting, shall state at whose direction or request the meeting is called and the purposes for which it is called. The attendance of any stockholder at a meeting, without protesting at the beginning of the meeting that the meeting is not lawfully called or convened, shall constitute a waiver of notice by him or her. Any previously scheduled meeting of stockholders may be postponed, and (unless the Certificate of Incorporation otherwise provides) any special meeting of stockholders may be canceled, by resolution of the Board upon public disclosure (as defined in Section 1.13(a)) given on or prior to the date previously scheduled for such meeting of stockholders.

(b) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to a stockholder may be given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked (1) if the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

(c) Notice shall be deemed given, if mailed, when deposited in the United States mail with postage prepaid, if addressed to a stockholder at his or her address on the corporation’s records. Notice given by electronic transmission shall be deemed given: (1) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) by any other form of electronic transmission, when directed to the stockholder.

(d) An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given, whether by a form of electronic transmission or otherwise, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

1.5 Quorum; Voting; Validation of Meeting. (a) The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the person presiding over the meeting or (ii) the stockholders by the vote of a majority of the voting power of the stock, present in person or represented by proxy shall have power to adjourn the meeting in accordance with Section 1.6 of these Bylaws.

(b) (i) When a quorum is present at any meeting, except as provided below in the case of a contested election (as defined herein) and subject to the rights of the holders of preferred stock to elect directors under specified circumstances pursuant to the Certificate of Incorporation, each director to be elected by stockholders shall be elected by the vote of the majority of the votes cast at any meeting for the election of directors at which a quorum is present. On all other matters, the vote of the holders of a majority of the stock having voting power on such matter present in person or represented by proxy and entitled to vote on the matter shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the laws of the State of Delaware or of the Certificate of Incorporation or these Bylaws, a vote of a greater number or voting by classes is required, in which case such express provision shall govern and control the decision of the question. In all matters, votes cast in accordance with any method adopted by the corporation shall be valid so long as such method is permitted under Delaware law.

(ii) For purposes of this Section 1.5(b), a majority of votes cast shall mean that the number of votes cast “for” a director’s election exceeds the number of votes cast “withhold” or “against” that director’s election. “Abstentions” and “broker non-votes” shall not be deemed to be votes cast with respect to that director’s election. In the event of a contested election of directors, directors shall be elected by a plurality of the votes cast in person or represented by proxy and entitled to vote on the election of a director. For purposes of this Section 1.5(b), a contested election shall mean any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected, with the determination that an election is “contested” to be made by the secretary of the corporation (A) following the close of the applicable notice of nomination period, if any, set forth in Section 1.11 based on whether one or more notices of nomination were timely filed in accordance with said Section 1.11 or (B) if later, reasonably promptly following the determination by any court or other tribunal of competent jurisdiction that one or more notice(s) of nomination were timely filed in accordance with said Section 1.11; provided that the determination that an election is a “contested election” by the secretary of the corporation pursuant to clause (A) or (B) shall be determinative only as to the timeliness of a notice of nomination and not otherwise as to its validity. If, prior to the time the corporation mails its initial proxy statement in connection with such election of directors, one or more notices of nomination are withdrawn (or declared invalid or untimely by any court or other tribunal of competent jurisdiction) such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the

election shall not be considered a contested election, but in all other cases, once an election is determined to be a contested election, directors shall be elected by the vote of a plurality of the votes cast.

(iii) In order for any incumbent director to become a nominee of the Board for further service on the Board, such person shall submit an irrevocable resignation, contingent on (A) that person’s not receiving a majority of the votes cast in an election that is not a contested election, and (B) acceptance of that resignation by the Board in accordance with the policies and procedures set forth herein or adopted by the Board for such purpose. In the event an incumbent director fails to receive a majority of the votes cast in an election that is not a contested election, the Corporate Governance Committee of the Board, or any committee serving the functions of the committee that is known as the Corporate Governance Committee as of the effective date of these Bylaws (the “Corporate Governance Committee”), shall make a recommendation to the Board as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board shall act on the resignation, taking into account the Corporate Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The Corporate Governance Committee in making its recommendation, and the Board in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director whose resignation is being considered shall not participate in the recommendation of the Corporate Governance Committee or the decision of the Board with respect to his or her resignation. If such incumbent director’s resignation is not accepted by the Board, such director shall continue to serve as a member of the Board until the next succeeding annual meeting of shareholders and until his or her successor is duly elected and qualified, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board pursuant to these Bylaws, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 2.10 or may decrease the size of the Board pursuant to the provisions of Section 2.1.

(c) If a quorum is initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken is approved by a majority of the stockholders initially constituting the quorum.

(d) The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy.

1.6 Adjourned Meeting; Notice. (a) Whether or not a quorum is present, either the person presiding over the meeting or the stockholders by the vote of a majority of the voting

power of the stock, present in person or represented by proxy, shall have the power to adjourn the meeting to another time or place or means of remote communications. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 1.5 of these Bylaws.

(b) When any meeting of stockholders, either annual or special, is adjourned to another time or place or means of remote communication, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than thirty (30) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Any such required notice of an adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 1.4 of these Bylaws. At any adjourned meeting the corporation may transact any business that might have been transacted at the original meeting.

1.7 Voting. (a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 1.8 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners, and to voting trusts and other voting agreements).

(b) Except as may be otherwise provided in the Certificate of Incorporation, by these Bylaws or as required by law, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question.

(c) Any stockholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote the remaining shares against the proposal; but if the stockholder fails to specify the number of shares which the stockholder is voting affirmatively or otherwise indicates how the number of shares to be voted affirmatively is to be determined, it will be conclusively presumed that the stockholder’s approving vote is with respect to all shares which the stockholder is entitled to vote.

(d) Voting need not be by ballot unless requested by a stockholder at the meeting or ordered by the person presiding over the meeting; however, all elections of directors shall be by written ballot, unless otherwise provided in the Certificate of Incorporation; provided, that if authorized by the Board, a written ballot may be submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxyholder.

1.8 Record Date for Stockholder Notice. (a) For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat, the Board may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by applicable law.

(b) If the Board does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting.

(d) The record date for any other lawful purpose shall be as provided in Section 5.8 of these Bylaws.

1.9 Proxies. Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy filed with the secretary of the corporation. A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person. No such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the secretary of the corporation.

A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the secretary of the corporation.

1.10 List of Stockholders. Not less than 10 days prior to the date of any meeting of stockholders, the secretary of the corporation shall prepare a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of such stockholder; provided, that the corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. For a period of not less than 10 days prior to the meeting, the list shall be available during ordinary business hours for inspection by any stockholder for any purpose germane to the meeting. During this period, the list shall be kept either (1) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or (2) during ordinary business hours, at the principal place of business of the corporation. If the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

1.11 Nominations of Directors. (a) Only persons who are nominated in accordance with the procedures set forth in this Section 1.11 shall be eligible for election by the stockholders as directors of the corporation. Nominations of persons for election to the Board may be made at a meeting of stockholders (i) pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the meeting by or at the direction of the Board, or (iii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the corporation who (A) is a stockholder of record at the time of giving of the notice provided for in this Section 1.11 and at the time of the meeting, (B) is entitled to vote for the election of directors at such meeting and (C) shall have complied with the procedures set forth in this Section 1.11; clause (iii) shall be the exclusive means for a stockholder to make nominations of persons to the Board before or at a meeting of stockholders.

To be eligible to be a nominee for election or re-election as a director of the corporation, the prospective nominee (whether nominated by or at the direction of the Board or by a stockholder), or someone acting on such prospective nominee’s behalf, must deliver (in accordance with any applicable time periods prescribed for delivery of notice under this Section 1.11) to the secretary at the principal executive offices of the corporation a written questionnaire providing such information with respect to the background and qualifications of such person and the background of any other person or entity on whose behalf the nomination is being made that would be required to be disclosed to stockholders pursuant to applicable law or the rules and regulations of any stock exchange applicable to the corporation, including all information concerning such persons that would be required to be disclosed in solicitations of proxies for election of directors

pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (or any successor thereto) (the “Exchange Act”) (which questionnaire shall be provided by the secretary upon written request). The prospective nominee must also provide a written representation and agreement, in the form provided by the secretary upon written request, that such prospective nominee: (i) will abide by the requirements of Section 1.5(b)(iii); (ii) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such prospective nominee, if elected as a director of the corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the corporation or (B) any Voting Commitment that could limit or interfere with such prospective nominee’s ability to comply, if elected as a director of the corporation, with such prospective nominee’s fiduciary duties under applicable law; (iii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein; and (iv) would be in compliance if elected as a director of the corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation. For purposes of this Section 1.11, a “nominee” shall include any person being considered to fill a vacancy on the Board.

(b) Nominations by any stockholder must be made pursuant to timely notice in proper written form to the secretary of the corporation in accordance with this paragraph. To be timely, a stockholder’s notice must be delivered to and received by the secretary at the principal executive offices of the corporation (i) in the case of an annual meeting, not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 days or delayed by more than 60 days from the date of the previous year’s meeting, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or, if later, the tenth day following the day on which public disclosure (as defined in Section 1.13 hereof) of the date of the meeting is first made, and (ii) in the case of a special meeting at which the Board gives notice that directors are to be elected, not earlier than the opening of business on the 120^th day prior to such special meeting and not later than the close of business on the later of the 90^th day prior to such special meeting or, if later, the tenth day following the day on which public disclosure is made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall any adjournment or postponement of a stockholders meeting or the public disclosure thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

To be in proper written form, such stockholder’s notice to the secretary shall set forth in writing (i) as to each person whom such stockholder proposes to nominate for election or re-election as a

director, (A) all information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) as well as (B) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, on whose behalf the nomination is being made, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; (ii) as to the stockholder giving the notice and the beneficial owner on whose behalf the nomination is made, the Proposing Stockholder Information (as defined in Section 1.13 hereof); (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination; and (iv) a representation as to whether the stockholder or the beneficial owner, if any, intends, or is or intends to be part of a group that intends, (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such nomination. At the request of the Board, any person nominated by the Board for election as a director shall furnish to the secretary that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. Notwithstanding anything in this Section 1.11 to the contrary, in the event that the number of directors to be elected to the Board of the corporation at a stockholders meeting is increased effective at such meeting and there is no public disclosure by the corporation naming all the nominees proposed by the Board for the additional directorships at least 100 days in advance of the first anniversary of the preceding year’s annual meeting or in the event of a special meeting of stockholders called for the purpose of electing directors, a stockholder’s notice required by this Section 1.11 shall also be considered timely, but only with respect to nominees for such additional directorships, if it shall be delivered to and received by the secretary not later than the close of business on the tenth day following the day on which such public disclosure is first made by the corporation.

(c) No person shall be eligible for election by the stockholders as a director unless nominated in accordance with the procedures set forth in this Section 1.11. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the person presiding

over the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee in compliance with such stockholder’s representation as required by clause (b)(iv) of this Section 1.11); and if he or she shall so determine, then he or she shall so declare at the meeting that the defective nomination shall be disregarded.

1.12 Stockholder Proposals. (a) At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board pursuant to Section 1.2. At any annual meeting of the stockholders, only such business (other than nominations of directors, which must be made in compliance with, and shall be exclusively governed by Section 1.11) shall be conducted as shall have been brought before the meeting (i) pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the meeting by or at the direction of the Board, or (iii) by any stockholder of the corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 1.12 and at the time of the meeting, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.12; clause (iii) shall be the exclusive means for a stockholder to submit such business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the corporation’s notice of meeting) before or at an annual meeting of stockholders.

(b) For business properly to be brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a), the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to and received by the secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that (i) no annual meeting was held in the previous year or (ii) the date of the annual meeting has been advanced by more than 30 days or delayed by more than 60 days from the date of the previous year’s meeting, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or, if later, the tenth day following the day on which public disclosure (as defined in Section 1.13 hereof) of the date of the meeting is first made. In no event shall any adjournment or postponement of a stockholders meeting or the public disclosure thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

To be in proper written form, such stockholder’s notice to the secretary shall set forth in writing (i) as to each matter the stockholder proposed to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at such meeting, and the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the corporation, the language of the proposed amendment), (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, the Proposing Stockholder Information (as defined in Section 1.13); (iii) any material interest of the stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (iv) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by the stockholder; (v) a representation that the stockholder is a holder of record of stock of the corporation, entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to propose such business; and (vi) a representation whether the stockholder or the beneficial owner, if any, intends, or is or intends to be part of a group that intends, (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to approve or adopt the proposal and/or (B) otherwise to solicit proxies from stockholders in support of such proposal.

(c) Notwithstanding anything in the Bylaws to the contrary, no business (other than the election of directors) shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1.12 or if it constitutes an improper subject for stockholder action under applicable law. The person presiding over an annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.12 (including whether the stockholder or beneficial owner, if any, on whose behalf the proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s proposal in compliance with such stockholder’s representation as required by (b)(vi) of this Section 1.12, and, if he or she should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

1.13 Public Disclosure; Conduct of Nominations and Proposals by Stockholders. (a) For purposes of Sections 1.4(a), 1.11 and 1.12 hereof, (i) “public disclosure” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act, and (ii) the term “group” shall have the meaning ascribed to such term under Section 13(d)(3) of the Exchange Act.

(b) For purposes of Section 1.11 and 1.12 hereof, the “Proposing Stockholder Information” shall mean, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, (A) the name and address, as they appear on the

corporation’s books, of such stockholder and of such beneficial owner, (B) the class or series and number of shares of the corporation’s stock which are, directly or indirectly, owned beneficially and of record, by such stockholder and such beneficial owner, (C) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the corporation or with a value derived in whole or in part from the value of any class or series of shares of the corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder or beneficial owner and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the corporation, (D) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or beneficial owner has a right to vote any shares of any security of the corporation, (E) any short interest of such stockholder or beneficial owner in any security of the corporation (for purposes hereof a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (F) any rights to dividends on the shares of the corporation owned beneficially by such stockholder or beneficial owner that are separated or separable from the underlying shares of the corporation, (G) any proportionate interest in shares of the corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or beneficial owner is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, (H) any performance-related fees (other than an asset-based fee) that such stockholder or beneficial owner is entitled to based on any increase or decrease in the value of shares of the corporation or Derivative Instruments, if any, as of the date of such notice, including any such interests held by members of such stockholder’s or beneficial owner’s immediate family sharing the same household (which information shall be supplemented by such stockholder and beneficial owner not later than 10 days after the record date for the meeting to disclose such ownership as of the record date), and (I) any other information relating to such stockholder and beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.

(c) Notwithstanding the foregoing provisions of these Sections 1.11 and 1.12, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the corporation. In order to be considered a qualified representative of the stockholder for purposes of these Bylaws, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders, and such person

must produce such writing, or a reliable reproduction of the writing, at the meeting of stockholders.

(d) Notwithstanding the foregoing provisions of Sections 1.11 and 1.12, a stockholder shall also comply with all applicable requirements of law and the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in Sections 1.11 and 1.12; provided, however, that any references in these Bylaws to law and the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations to be considered pursuant to Section 1.11 (including clause (b) thereof) or business proposals to be considered pursuant to Section 1.12 (including clause (a)(iii) thereof). Nothing in these Sections 1.11 and 1.12 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of preferred stock to elect directors under specified circumstances pursuant to the Certificate of Incorporation.

(e) The provisions of Sections 1.11 and 1.12 shall also govern what constitutes timely notice for purposes of Rule 14a-4(c) of the Exchange Act.

1.14 Meeting Required. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, such vote may only be taken at an annual or special meeting with prior notice, except as provided in the Certificate of Incorporation.

1.15 Organization. (a) Meetings of stockholders shall be presided over by the chairman of the Board, if any, or in his or her absence by the vice chairman of the Board, if any, or in his or her absence, by the chief executive officer, if any, or in his or her absence by a chairman of the meeting, which chairman must be an officer or director of the corporation and must be designated as chairman of the meeting by the Board. The secretary, or in his or her absence an assistant secretary, or in his or her absence a person whom the person presiding over the meeting shall appoint, shall act as secretary of the meeting and keep a record of the proceedings thereof.

(b) The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem appropriate. Subject to such rules and regulations of the Board, if any, the person presiding over the meeting shall have the right and authority to convene and adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of the person presiding over the meeting, are necessary, appropriate or convenient for the proper conduct of the meeting, including (i) establishing an agenda or order of business for the meeting, (ii) rules and procedures for maintaining order at the meeting and the safety of those present, including removing any stockholder who refuses to comply with meeting procedures, rules or guidelines as established by the person presiding over the meeting; (iii) limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and

such other persons as the person presiding over the meeting shall permit, (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof, (v) limitations on the time allotted to questions or comments by participants, (vi) regulation of the opening and closing of the polls for balloting, (vii) recessing or adjourning of the meeting, either by the person presiding over the meeting or the stockholders by the vote of a majority of the voting power of the stock, present in person or represented by proxy, and (viii) regulation of the voting or balloting, as applicable, including matters which are to be voted on by ballot, if any. The person presiding over the meeting shall have sole, absolute and complete authority and discretion to decide questions of compliance with the foregoing procedures and his or her ruling thereon shall be final and conclusive. The person presiding over the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if the person presiding over the meeting should so determine and declare, any such matter or business shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

1.16 Inspectors of Election. Before any meeting of stockholders, the Board may, and shall if required by law, appoint one or more inspectors of election, who may be employees of the corporation, to act at the meeting or its adjournment and to make a written report thereof. If any person appointed as inspector fails to appear or fails or refuses to act, then the person presiding over the meeting may, and upon the request of any stockholder or a stockholder’s proxy, shall appoint a person to fill that vacancy.

Such inspectors shall:

	(a)		determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies and ballots;

	(b)		receive votes and ballots, including, if applicable, votes and ballots submitted by means of electronic transmission;

	(c)		hear and determine all challenges and questions in any way arising in connection with the right to vote;

	(d)		determine when the polls shall close;

	(e)		determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector or inspectors;

	(f)		certify their determination of the number of shares of the corporation represented at the meeting and such inspectors’ count of all votes and

			ballots, which certification and report shall specify such other information as may be required by law; and

	(g)		do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

Each inspector of election shall perform his or her duties impartially, in good faith, to the best of his or her ability and as expeditiously as is practical, and before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector of election with strict impartiality and according to the best of his or her ability. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the corporation, the inspectors may consider such information as is permitted by applicable law. If there are three (3) or more inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

1.17 Election Out of Section 203. Pursuant to the corporation’s original Certificate of Incorporation, the corporation has expressly elected not to be governed by Section 203 of the General Corporation Law of Delaware.

2. BOARD OF DIRECTORS.

2.1 Number, Qualification, Election and Term of Directors. Subject to the provisions of the General Corporation Law of Delaware and to any limitations in the Certificate of Incorporation, the business and affairs of the corporation shall be managed by or under the direction of the Board. Subject to the rights of the holders of any series of preferred stock, the number of directors may be fixed or changed from time to time by resolution of a majority of the entire Board; provided the number shall be no less than seven (7) and no more than fifteen (15), but no decrease may shorten the term of any incumbent director. Directors shall be elected at each annual meeting of stockholders, as provided in Section 1.5(b), and shall hold office until the next annual meeting of stockholders and until the election and qualification of their respective successors, subject to the provisions of Section 2.9. As used in these Bylaws, the term “entire Board” means the total number of directors which the corporation would have if there were no vacancies on the Board.

2.2 Quorum and Manner of Acting. (a) A majority of the entire Board shall constitute a quorum for the transaction of business at any meeting, except as provided in Section 2.10 of these Bylaws. In the absence of a quorum a majority of the directors present may adjourn any meeting from time to time until a quorum is present. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the Board, subject to the provisions of the Certificate of Incorporation and applicable law.

(b) A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

2.3 Place of Meetings. Meetings of the Board may be held in or outside Delaware.

2.4 Annual and Regular Meetings. Annual meetings of the Board for the election of officers and consideration of other matters shall be held either (a) without notice immediately after the annual meeting of stockholders and at the same place, or (b) as soon as practicable after the annual meeting of stockholders, on notice as provided in Section 2.6 of these Bylaws. Regular meetings of the Board may be held without notice and, unless otherwise specified by the Board, shall be held in accordance with a schedule and at such locations as determined from time to time by the Board, provided no less than five (5) such meetings shall be held each year. If the day fixed for a regular meeting is a legal holiday, the meeting shall be held on the next business day.

2.5 Special Meetings. Special meetings of the Board may be called by the chairman of the board, the chief executive officer or by a majority of the directors in office.

2.6 Notice of Meetings; Waiver of Notice. Notice of the time and place of each special meeting of the Board, and of each annual meeting not held immediately after the annual meeting of stockholders and at the same place, shall be given to each director in advance of the time set for such meeting as provided herein; provided, that if the meeting is to be held at the principal executive offices of the corporation, the notice need not specify the place of the meeting. Except for amendments to the Bylaws, as provided under Section 6.9, notice of a special meeting need not state the purpose or purposes for which the meeting is called and, unless indicated in the notice thereof, any and all business may be transacted at a special meeting. Notice need not be given to any director who submits a signed waiver of notice before or after the meeting or who attends the meeting without protesting at the beginning of the meeting the transaction of any business because the meeting was not lawfully called or convened. Notice of any adjourned meeting need not be given, other than by announcement at the meeting at which the adjournment is taken unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified herein to the directors who were not present at the time of adjournment. Notice of a special meeting may be given by any one or more of the following methods and the method used need not be the same for each director being notified:

	(a)		Written notice sent by mail at least three (3) days prior to the meeting;

	(b)		Personal service at least twenty-four (24) hours prior to the time of the meeting;

	(c)		Telegraphic notice at least twenty-four (24) hours prior to the time of the meeting, said notice to be sent as a straight full-rate telegram;

	(d)		Telephonic notice at least twenty-four (24) hours prior to the time of the meeting; or

	(e)		Facsimile, email or other means of electronic transmission at least twenty-four (24) hours prior to the time of the meeting.

Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director.

2.7 Board or Committee Action Without a Meeting. Any action required or permitted to be taken by the Board or by any committee of the Board may be taken without a meeting if all of the members of the Board or of the committee individually or collectively consent in writing or by electronic transmission to the adoption of a resolution authorizing the action. Such action by written consent shall have the same force and affect as a unanimous vote of the Board. The resolution and the written consents or electronic transmission or transmissions by the members of the Board or the committee shall be filed with the minutes of the proceeding of the Board or of the committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

2.8 Participation in Board or Committee Meetings by Conference Telephone. Any or all members of the Board or of any committee of the Board may participate in a meeting of the Board or of the committee by means of a conference telephone or other communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.

2.9 Resignation and Removal of Directors. Any director may resign at any time by delivering his or her resignation in writing, including by means of electronic transmission, to the president or secretary of the corporation, to take effect at the time when delivered (unless otherwise specified therein) and the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Subject to applicable law and the rights of the holders of any series of preferred stock with respect to such series of preferred stock, any or all of the directors may be removed at any time, either with or without cause, by vote of the holders of a majority of the stock having voting power and entitled to vote thereon.

2.10 Vacancies. Subject to applicable law and the rights of the holders of any series of preferred stock with respect to such series of preferred stock, and unless the Board otherwise directs, any vacancy in the Board, including one created by an increase in the authorized number of directors, may be filled for the unexpired term by a majority vote of the remaining directors,

although less than a quorum. No decrease in the number of authorized directors shall shorten the term of any incumbent director.

2.11 Compensation. Directors and members of committees shall receive such compensation as the Board determines, together with reimbursement of their reasonable expenses in connection with the performance of their duties. A director may also be paid for serving the corporation, its affiliates or subsidiaries in other capacities.

2.12 Notice to Members of the Board of Directors. Each member of the Board shall file with the secretary of the corporation an address to which mail or telegraphic notices shall be sent, a telephone number to which a telephonic or facsimile notice may be transmitted and, at the sole discretion of a director, such electronic address to which other electronic transmissions may be sent. A notice mailed, telegraphed, telephoned or transmitted by facsimile, email or other means of electronic transmission in accordance with the instructions provided by the director shall be deemed sufficient notice. Such address or telephone number may be changed at any time and from time to time by a director by giving written notice of such change to the secretary. Failure on the part of any director to keep an address and telephone number on file with the secretary (but not including an address for other electronic transmissions) shall automatically constitute a waiver of notice of any regular or special meeting of the Board which might be held during the period of time that such address and telephone number are not on file with the secretary. A notice shall be deemed to be mailed when deposited in the United States mail, postage prepaid. A notice shall be deemed to be telegraphed when the notice is delivered to the transmitter of the telegram and either payment or provision for payment is made by the corporation. Notice shall be deemed to be given by telephone if the notice is transmitted over the telephone to some person (whether or not such person is the director) or message recording device answering the telephone at the number which the director has placed on file with the secretary. Notice shall be deemed to be given by facsimile, email or other means of electronic transmission when sent to the telephone number or other address which the director has placed on file with the secretary.

2.13 Organization. Meetings of the Board shall be presided over by the chairman of the Board, if any, or in his or her absence by the vice chairman of the Board, if any, or in his or her absence by the chief executive officer, if any, or in his or her absence by the president, if any. In the absence of all such directors, a president pro tem chosen by a majority of the directors present shall preside at the meeting. The secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

2.14 Director Emeritus. The Board may from time to time elect one or more directors emeritus (each a “Director Emeritus”), each of whom shall serve, at the pleasure of the Board, until the first meeting of the Board next following the annual meeting of stockholders, subject to an annual review, or until his or her earlier resignation or removal by the Board. A Director Emeritus shall serve as an advisor and consultant to the Board, subject to such terms and

conditions as may be approved by the Board, and may be appointed by the Board to serve as an advisor and consultant to one or more committees of the Board. Such Director Emeritus shall also be available for consultation with management of the corporation. A Director Emeritus shall have the privilege of attending meetings of the Board, and meetings of any committee of the Board for which he or she has been appointed to serve as an advisor and consultant. A Director Emeritus may participate in the discussions that occur during the portions of such meetings which he or she attends. Notice of such meetings to a Director Emeritus shall not be required under any applicable law, the Certificate of Incorporation, or these Bylaws. Each Director Emeritus shall be entitled to receive such compensation as may be fixed from time to time by the Board. No Director Emeritus shall be entitled to vote on any business coming before the Board or any committee of the Board, nor shall he or she be counted as a member of the Board or any such committee for the purpose of determining the number of Directors necessary to constitute a quorum, for the purpose of determining whether a quorum is present, or for any other purpose whatsoever. In the case of a Director Emeritus, the occurrence of any event which in the case of a director would create a vacancy on the Board, shall be deemed to create a vacancy in such position; but the Board may declare the position terminated until such time as the Board shall again deem it proper to create and to fill the position. A Director Emeritus shall be entitled to indemnification under these Bylaws to the same extent, and subject to the same conditions and limitations, as a member of the Board.

3. COMMITTEES.

3.1 Audit Committee. The Board by resolution shall designate an Audit Committee consisting of three directors or such other number as may be specified by the Board, which shall review the internal financial controls of the corporation, and the integrity of its financial reporting, and have such other powers and duties as the Board determines. The Board shall adopt a charter, which may be amended from time to time, setting for the powers and duties of the Audit Committee. The members of the Audit Committee shall serve at the pleasure of the Board. All action of the Audit Committee shall be reported to the Board at its next meeting.

3.2 Compensation Committee. The Board by resolution shall designate a Compensation Committee consisting of three directors or such other number as may be specified by the Board, which shall administer the corporation’s compensation plans and have such other powers and duties as the Board determines. The members of the Compensation Committee shall serve at the pleasure of the Board. All action of the Compensation Committee shall be reported to the Board at its next meeting. The Board shall adopt a charter, which may be amended from time to time, setting forth the powers and duties of the Compensation Committee.

3.3 Corporate Governance Committee. The Board by resolution shall designate a Corporate Governance Committee consisting of three directors or such other number as may be specified by the Board, which shall nominate candidates for election to the Board and have such other powers and duties as the Board determines. The members of the Corporate Governance Committee shall serve at the pleasure of the Board. All action of the Corporate Governance

Committee shall be reported to the Board at its next meeting. The Board shall adopt a Charter, which may be amended from time to time, setting forth the powers and duties of the Corporate Governance Committee.

3.4 Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate other committees of directors of one or more directors, which shall serve at the Board’s pleasure and have such powers and duties as the Board determines.

3.5 Meetings and Action of Committees. (a) The Board may designate one or more directors as alternate members of any committee (other than the Audit Committee), who may replace any absent or disqualified member at any meeting of the committee. Each committee shall keep regular minutes of its meetings and report the same to the Board at its next meeting. Each committee may adopt rules of procedure and shall meet as provided by those rules or by resolutions of the Board.

(b) Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article 2 of these Bylaws, including Section 2.2 (quorum and manner of acting), Section 2.3 (place of meetings), Section 2.4 (annual and regular meetings), Section 2.5 (special meetings), 2.6 (notice of meetings and waiver of notice), Section 2.7 (board or committee action without a meeting), Section 2.8 (participation in board or committee meetings by conference telephone), Section 2.12 (notice to members of the board of directors), and Section 2.13 (organization), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, (i) that the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee, (ii) that special meetings of committees may also be called by resolution of the Board, (iii) that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee; (iv) that a majority of the members of a committee shall constitute a quorum for the transaction of business at any meeting; and (v) that the affirmative vote of a majority of the members of a committee shall be required to take action in respect of any matter presented to or requiring the approval of the committee.

3.6 Election Pursuant to Section 141(c)(2). By resolution of the Board, the corporation has elected pursuant to Section 141(c) of the General Corporation Law of Delaware to be governed by paragraph (2) of Section 141(c) in respect of committees of the Board.

4. OFFICERS.

4.1 Number; Security. The executive officers of the corporation shall consist of a chief executive officer, a president, one or more vice presidents (including executive vice president(s) and senior vice president(s) if the Board so determines), a secretary and a treasurer and a chief financial officer who shall be chosen by the Board and such other officers, including but not limited to a chairman of the Board, a vice chairman of the Board, as the Board shall deem

expedient, who shall be chosen in such manner and hold their offices for such terms as the Board may prescribe. Any two or more offices may be held by the same person. Either the chairman of the Board or the president, as the Board may designate from time to time, may be the chief executive officer of the corporation. The Board may from time to time designate the president or any executive vice president as the chief operating officer of the corporation. Any vice president, treasurer or assistant treasurer, or assistant secretary, respectively, may exercise any of the powers of the president, the chief financial officer, or the secretary, respectively, as directed by the Board and shall perform such other duties as are imposed upon such officer by the Bylaws or the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his duties.

4.2 Election; Term of Office; Salaries. The term of office and salary of each of the officers of the corporation and the manner and time of the payment of such salaries shall be fixed and determined by the Board and may be altered by said Board from time to time at its pleasure, subject to the rights, if any, of said officers under any contract of employment; provided, that the Board may designate such responsibilities to the Compensation Committee and may also authorize the chief executive officer or the president to establish the salaries of officers appointed pursuant to Section 4.3.

4.3 Subordinate Officers. The Board may appoint subordinate officers (including assistant secretaries and assistant treasurers), agents or employees, each of whom shall hold office for such period and have such powers and duties as the Board determines. The Board may delegate to any executive officer or to any committee the power to appoint and define the powers and duties of any subordinate officers, agents or employees.

4.4 Resignation and Removal of Officers. Any officer may resign at any time by delivering his resignation in writing to the chief executive officer, president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any officer elected or appointed by the Board or appointed by an executive officer or by a committee may be removed by the Board either with or without cause, and in the case of an officer appointed by an executive officer or by a committee, by the officer or committee who appointed him or her or by the president.

4.5 Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these Bylaws for election or appointment to the office.

4.6 Chairman of the Board. The chairman of the Board, if any, shall preside at meetings of the stockholders and the Board and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws. The chairman of the Board shall report to the Board.

4.7 Vice Chairman of the Board. The vice chairman of the Board, if there shall be one, shall, in the case of the absence, disability or death of the chairman of the Board, exercise all the powers and perform all the duties of the chairman of the Board. The vice chairman shall have such other powers and perform such other duties as may be granted or prescribed by the Board.

4.8 Chief Executive Officer. Subject to the control of the Board, the chief executive officer of the corporation shall have general supervision, direction and control over the business of the corporation. The chief executive officer shall have such powers and be subject to such duties as the Board may from time to time prescribe. Without limiting the generality of the foregoing, the chief executive officer shall have the power, which he may delegate to other officers of the corporation, to affix the signature of the corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the chief executive officer, should be executed on behalf of the corporation, and to sign certificates for shares of capital stock of the corporation.

4.9 President. The powers and duties of the president are:

(a) To affix the signature of the corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the president, should be executed on behalf of the corporation, and to sign certificates for shares of capital stock of the corporation.

(b) To have such other powers and be subject to such other duties as the Board may from time to time prescribe.

4.10 Vice President. In case of the absence, disability or death of the president, the elected vice president, or one of the elected vice presidents, shall exercise all the powers and perform all the duties of the president. If there is more than one elected vice president, the order in which the elected vice presidents shall succeed to the powers and duties of the president shall be as fixed by the Board. The elected vice president or elected vice presidents shall have such other powers and perform such other duties as may be granted or prescribed by the Board.

Vice presidents appointed pursuant to Section 4.3 shall have such powers and duties as may be fixed by the chairman of the Board or president, except that such appointed vice presidents may not exercise the powers and duties of the president. Each vice president shall have such powers and duties as the Board or the president assigns to him or her.

4.11 Secretary. The powers and duties of the secretary are:

(a) To keep a book of minutes at the principal office of the corporation, or

such other place as the Board may order, of all meetings of its directors and stockholders with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors’ meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof.

(b) To keep the seal of the corporation, if any, and affix the same, if any, to all instruments which may require it.

(c) To keep or cause to be kept at the principal office of the corporation, or at the office of the transfer agent or agents, a share register, or duplicate share registers, showing the names of the stockholders and their addresses, the number of and classes of shares, and the number and date of cancellation of every certificate surrendered for cancellation.

(d) To keep a supply of certificates for shares of the corporation, to fill in all certificates issued, and to make a proper record of each such issuance; provided, that so long as the corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents.

(e) To transfer upon the share books of the corporation any and all shares of the corporation; provided, that so long as the corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents, and the method of transfer of each certificate shall be subject to the reasonable regulations of the transfer agent to which the certificate is presented for transfer, and also, if the corporation then has one or more duly appointed and acting registrars, to the reasonable regulations of the registrar to which the new certificate is presented for registration; and provided, further that no certificate for shares of stock shall be issued or delivered or, if issued or delivered, shall have any validity whatsoever until and unless it has been signed or authenticated in the manner provided in Section 5.1 hereof.

(f) To make service and publication of all notices that may be necessary or proper, and without command or direction from anyone. In case of the absence, disability, refusal, or neglect of the secretary to make service or publication of any notices, then such notices may be served and/or published by the president or a vice president, or by any person thereunto authorized by either of them or by the board of directors or by the holders of a majority of the outstanding shares of the corporation.

(g) To sign certificates for shares of capital stock of the corporation.

(h) Generally to do and perform all such duties as pertain to the office of secretary and as may be required by the Board.

4.12 Treasurer. The treasurer shall be or shall be under the direction of the chief financial officer of the corporation, and shall be in charge of the corporation’s books and accounts. Subject to the control of the Board, he or she shall have such other powers and duties as the Board or the president assigns to him or her.

4.13 Chief Financial Officer. The powers and duties of the chief financial officer are:

(a) To supervise the corporate-wide treasury functions and financial reporting to external bodies.

(b) To have the custody of all funds, securities, evidence of indebtedness and other valuable documents of the corporation and, at the chief financial officer’s discretion, to cause any or all thereof to be deposited for account of the corporation at such depositary as may be designated from time to time by the Board.

(c) To receive or cause to be received, and to give or cause to be given, receipts and acquittances for monies paid in for the account of the corporation.

(d) To disburse, or cause to be disbursed, all funds of the corporation as may be directed by the Board, taking proper vouchers for such disbursements.

(e) To render to the chief executive officer and president, and to the Board, whenever they may require, accounts of all transactions and of the financial condition of the corporation.

(f) Generally to do and perform all such duties as pertain to the office of chief financial officer and as may be required by the Board.

5. SHARES.

5.1 Shares of the Corporation. The shares of the corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice chairman of the board of directors or by the president or a vice-president, and by the secretary or an assistant secretary, or the treasurer or an assistant treasurer, representing the number of shares registered in certificate form. The signatures of any such officers thereon may be facsimiles. The seal of the corporation shall be impressed, by original or by facsimile, printed or engraved, on all such certificates. The certificate shall also be signed by the transfer agent and a registrar and the signature of either the transfer agent or the registrar may also be facsimile,

engraved or printed. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the corporation with the same effect as if such officer, transfer agent, or registrar had not ceased to be such officer, transfer agent, or registrar at the date of its issue.

5.2 Special Designation on Certificates. If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights or each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

5.3 Lost, Stolen, Destroyed and Mutilated Certificates. The owner of any stock of the corporation shall immediately notify the corporation of any loss, theft, destruction or mutilation of any certificate therefor, and the corporation may issue uncertificated shares or a new certificate for stock in the place of any certificate theretofore issued by it and alleged to have been lost, stolen or destroyed, and the Board may, in its discretion, require the owner of the lost, stolen or destroyed certificate or his or her legal representatives to give the corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Board shall in its uncontrolled discretion determine, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of any such new certificate or uncertificated shares. The Board may, however, in its discretion refuse to issue any such new certificate or uncertificated shares except pursuant to legal proceedings under the laws of the State of Delaware in such case made and provided.

5.4 Stock Records. The corporation or a transfer agent shall keep stock books in which shall be recorded the number of shares issued, the names of the owners of the shares, the number owned by them respectively, whether such shares are represented by certificates or are uncertificated, and the transfer of such shares with the date of transfer.

5.5 Transfers. Transfers of stock shall be made only on the stock transfer record of the corporation upon surrender of the certificate or certificates being transferred which certificate shall be properly endorsed for transfer or accompanied by a duly executed stock power, except in the case of uncertificated shares, for which the transfer shall be made only upon receipt of transfer documentation reasonably acceptable to the corporation. Whenever a certificate is

endorsed by or accompanied by a stock power executed by someone other than the person or persons named in the certificate, or the transfer documentation for the uncertificated shares is executed by someone other than the holder of record thereof, evidence of authority to transfer same shall also be submitted with the certificate or transfer documentation. All certificates surrendered to the corporation for transfer shall be canceled.

5.6 Regulations Governing Issuance and Transfers of Shares. The Board shall have the power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer and registration of shares of stock of the corporation.

5.7 Transfer Agents and Registrars. The Board may appoint, or authorize one or more officers to appoint, one or more transfer agents and one or more registrars.

5.8 Record Date for Purposes Other than Notice and Voting. For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which shall not be more than sixty (60) days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by law. If the Board does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the applicable resolution.

6. MISCELLANEOUS.

6.1 Seal. The Board may adopt a corporate seal, which shall be in the form of a circle and shall bear the corporation’s name and the year and state in which is was incorporated.

6.2 Fiscal Year. The Board may determine the corporation’s fiscal year. Until changed by the Board, the corporation’s fiscal year shall be the calendar year.

6.3 Voting of Shares in Other Corporations. Shares in other corporations which are held by the corporation may be represented and voted by the president or a vice president of this corporation or by proxy or proxies appointed by one of them. The Board may, however, appoint some other person to vote the shares.

6.4 Checks; Drafts; Evidences of Indebtedness. From time to time, the Board shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the

name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

6.5 Corporate Contracts and Instruments; How Executed. The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

6.6 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, the term “person” includes both a corporation and a natural person, and the masculine gender includes the feminine gender and vice versa. Whenever the words “include,” “includes” or “including” are used in these Bylaws they shall be deemed to be followed by the words “without limitation.”

6.7 Provisions Additional to Provisions of Law. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal.

6.8 Provisions Contrary to Provisions of Law. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which upon being construed in the manner provided in Section 6.7 hereof, shall be contrary to or inconsistent with any applicable provisions of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws would have been adopted and each article, section, subsection, subdivision, sentence, clause or phrase thereof, irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.

6.9 Amendments. Bylaws may be amended, repealed or adopted by a majority of the entire Board, provided that written notice of any such proposed action shall have been given to each director prior to such meeting, or that notice of such addition, amendment, alteration or report shall have been given at the preceding meeting of the Board. The Bylaws may also be amended, repealed or adopted by the affirmative vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereon; provided, however, that in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, repeal or adoption of the new Bylaw or Bylaws must be contained in the notice of such special meeting.

Whenever an amendment or new bylaw is adopted, it shall be copied in the book of bylaws with the original bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or the filing of the operative written consent(s) shall be stated in said book.

6.10 Indemnification and Insurance.¹

(a) Generally.

(1) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the corporation as a director or officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director or officer (which, for purposes hereof, shall include a trustee or similar capacity)of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.

(2) The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the corporation as an employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.

(3) The indemnification provided by this subsection (a) shall be from and against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, but shall only be provided if the indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

(4) Notwithstanding the foregoing provisions of this subsection (a), in the case of an action or suit by or in the right of the corporation to procure a judgment in its favor (i) the indemnification provided by this subsection (a) shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or


¹		As Amended February 6, 2001

settlement of such action or suit, and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

(5) The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

(b) Successful Defense. To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsection (a) hereof or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith. If a director or officer is not wholly successful, on the merits or otherwise, in any action, suit or proceeding but is successful, on the merits or otherwise, as to any claim, issue or matter in such action, suit or proceeding, the corporation shall indemnify such person against all expenses (including attorneys’ fees) actually and reasonably incurred by such person or on his or her behalf relating to each successfully resolved claim, issue or matter. For purposes of this Section 6.10 and without limitation, the termination of a claim, issue or matter in an action, suit or proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(c) Determination That Indemnification Is Proper. Any indemnification of a person entitled to indemnity under subsection (a)(1) hereof shall (unless otherwise ordered by a court) be made by the corporation unless a determination is made that indemnification of such person is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in subsection (a)(3) hereof. Any indemnification of a person entitled to indemnity under subsection (a)(2) hereof may (unless otherwise ordered by a court) be made by the corporation upon a determination that indemnification of such person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (a)(3) hereof. Any such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even if less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders.

(d) Advance Payment of Expenses; Notification and Defense of Claim.

(i) Expenses (including attorneys’ fees) incurred by a director or officer in defending a threatened or pending civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as authorized in this Section. Such expenses (including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

(ii) Promptly after receipt by a director, officer, employee or agent of notice of the commencement of any action, suit or proceeding, such person shall, if a claim thereof is to be made against the corporation hereunder, notify the corporation of the commencement thereof. The failure to promptly notify the corporation will not relieve the corporation from any liability that it may have to such person hereunder, except to the extent the corporation is prejudiced in its defense of such action, suit or proceeding as a result of such failure.

(iii) The Board of Directors may authorize the corporation’s counsel to represent a director, officer, employee or agent in any action, suit or proceeding, whether or not the corporation is a party to such action, suit or proceeding. In the event the corporation shall be obligated to pay the expenses of any person with respect to an action, suit or proceeding, as provided in this Section 6.10, the corporation, if appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with counsel reasonably acceptable to such person, upon the delivery to such person of written notice of its election to do so. After delivery of such notice, approval of such counsel by such person and the retention of such counsel by the corporation, the corporation will not be liable to such person under this Section 6.10 for any fees of counsel subsequently incurred by such person with respect to the same action, suit or proceeding, provided that (i) the director, officer, employee or agent shall have the right to employ his or her counsel in such action, suit or proceeding at such person’s expense and (b) if (i) the employment of counsel by such person has been previously authorized in writing by the corporation, (ii) counsel to the director, officer, employee or agent shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the corporation and such person in the conduct of any such defense or (iii) the corporation shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding, then the fees and expenses of such person’s counsel shall be at the expense of the corporation.

(iv) Notwithstanding any other provision of this Section 6.10 to the contrary, to the extent that any director or officer is, by reason of his or her corporate status, a witness or otherwise participates in any action, suit or proceeding at a time when such person is not a party in the action, suit or proceeding, the corporation shall indemnify such person against all expenses (including attorneys’ fees) actually and reasonably incurred by such person or on his or her behalf in connection therewith.

(e) Procedure for Indemnification of Required Indemnitees. Any indem-nification of a person the corporation is required to indemnify under subsection (a) hereof, or advance of costs, charges and expenses of a person the corporation is required to pay under subsection (d) hereof, shall be made promptly, and in any event within 60 days, upon the written request of such person. If the corporation fails to respond within 60 days, then the request for indemnification shall be deemed to be approved. The right to indemnification or advances as granted by this Section 6.10 shall be enforceable by the person the corporation is required to indemnify under subsection (a) hereof in any court of competent jurisdiction if the corporation denies such request, in whole or in part. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under subsection (d) hereof where the required undertaking, if any, has been received by the corporation) that the claimant has not met the standard of conduct set forth in subsection (a) hereof, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (a) hereof, nor the fact that there has been an actual determination by the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

A director or officer shall be presumed to be entitled to indemnification under this Section 6.10 upon submission of a request for indemnification pursuant to this subsection (e), and the corporation shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used as a basis for a determination of entitlement to indemnification unless the corporation provides information sufficient to overcome such presumption by clear and convincing evidence.

(f) Survival; Preservation of Other Rights. The provisions of this Section 6.10 shall be deemed to be a contract between the corporation and each director, officer, employee and agent who serves in such capacity at any time while these provisions as well as the relevant provisions of the General Corporation Law of the State of Delaware are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a “contract right” may not be modified retroactively without the consent of such director, officer, employee or agent. The indemnification provided by this Section 6.10 shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and

shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

(g) Indemnification Agreements. Without limiting the provisions of this Section 6.10, the corporation is authorized from time to time, without further action by the stockholders of the corporation, to enter into agreements with any director, officer, employee or agent of the corporation providing such rights of indemnification as the corporation may deem appropriate, up to the maximum extent permitted by law. Any agreement entered into by the corporation with a director may be authorized by the other directors, and such authorization shall not be invalid on the basis that similar agreements may have been or may thereafter be entered into with other directors.

(h) Insurance and Subrogation

(i) The corporation may purchase and maintain insurance on behalf of any person who is or was or has agreed to serve at the request of the corporation as a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against, and incurred by, him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Section 6.10.

(ii) In the event of any payment by the corporation under this Section 6.10, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of such person, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the corporation to bring suit to enforce such rights in accordance with the terms of such insurance policy.

(iii) The corporation shall not be liable under this Section 6.10 to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) if and to the extent that such person has otherwise actually received such payment under the Certificate of Incorporation or these Bylaws or any insurance policy, contract, agreement or otherwise.

(i) Certain Definitions. For purposes of this Section 6.10, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint

venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Section 6.10 with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Section 6.10, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Section 6.10.

(j) Limitation on Indemnification. Notwithstanding any other provision herein to the contrary, the corporation shall not be obligated pursuant to these Bylaws:

(a) To indemnify or advance expenses to a director, officer, employee or agent with respect to proceedings (or part thereof) initiated by such person, except with respect to proceedings brought to establish or enforce a right to indemnification (which shall be governed by the provisions of this Section 6.10), unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the corporation.

(b) To indemnify a director, officer, employee or agent for any expenses incurred by such person with respect to any proceeding instituted by such person to enforce or interpret these Bylaws, if a court of competent jurisdiction determines that each of the material assertions made by such person in such proceedings was not made in good faith or was frivolous;

(c) To indemnify a director, officer, employee or agent for expenses or the payment of profits arising from the purchase and sale by such person of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

(k) Certain Settlement Provisions. The corporation shall have no obligation to indemnify any director, officer, employee or agent under this Section 6.10 for amounts paid in settlement of any action, suit or proceeding without the corporation’s prior written consent, which shall not be unreasonably withheld. The corporation shall not settle any action, suit or proceeding in any manner that would impose any fine or other obligation on any director or officer or employee or agent without such person’s prior written consent.

(l) Savings Clause. If this Section 6.10 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall

nevertheless indemnify each director or officer and may indemnify each employee or agent of the corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Section 6.10 that shall not have been invalidated and to the full extent permitted by applicable law.

(m) Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to a director or officer in whole or in part, it is agreed that, in such event, the corporation shall contribute to the payment of such director’s or officer’s costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, but not including an action by or in the right of the corporation, in an amount that is just and equitable in the circumstances, taking into account, among other things, contributions by other directors and officers of the corporation or others pursuant to indemnification agreements or otherwise; provided, that, without limiting the generality of the foregoing, such contribution shall not be required where such holding by the court is due to (i) the failure of such director or officer to meet the standard of conduct set forth in subsection (a) hereof, or (ii) any limitation on indemnification set forth in subsection (h)(iii), (j) or (k) hereof.

(n) Form and Delivery of Communications. Any notice, request or other communication required or permitted to be given to the corporation under this Section 6.10 shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the General Counsel or secretary of the corporation at its principal executive offices.

(o) Subsequent Legislation. If the General Corporation Law of Delaware is amended after adoption of this Section 6.10 to expand further the indemnification permitted to directors or officers, then the corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.

EX-31.1 3 c57451exv31w1.htm EX-31.1 exv31w1

Exhibit 31.1

I, George Paz, certify that:

1)		I have reviewed this quarterly report on Form 10-Q of Express Scripts, Inc.;

2)		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: April 28, 2010	/s/ George Paz
	George Paz, Chairman, President and
	Chief Executive Officer

EX-31.2 4 c57451exv31w2.htm EX-31.2 exv31w2

Exhibit 31.2

I, Jeffrey Hall, certify that:

1)		I have reviewed this quarterly report on Form 10-Q of Express Scripts, Inc.;

2)		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: April 28, 2010	/s/ Jeffrey Hall
	Jeffrey Hall, Executive Vice President and
	Chief Financial Officer

EX-32.1 5 c57451exv32w1.htm EX-32.1 exv32w1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AND EXCHANGE ACT RULE 13a-14(b)

In connection with the accompanying Form 10-Q (the “Report”) of Express Scripts, Inc. (the “Company”) for the period ended March 31, 2010, I, George Paz, Chairman, President and Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and Exchange Act Rule 13a-14(b) that:

	(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	BY:	/s/ George Paz
		George Paz
		Chairman, President and Chief Executive Officer Express Scripts, Inc.

Date: April 28, 2010

EX-32.2 6 c57451exv32w2.htm EX-32.2 exv32w2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AND EXCHANGE ACT RULE 13a-14(b)

In connection with the accompanying Form 10-Q (the “Report”) of Express Scripts, Inc. (the “Company”) for the period ended March 31, 2010, I, Jeffrey Hall, Executive Vice President and Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and Exchange Act Rule 13a-14(b) that:

	(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	BY:	/s/ Jeffrey Hall
		Jeffrey Hall
		Executive Vice President and Chief Financial Officer Express Scripts, Inc.

Date: April 28, 2010

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<div style="font-family: 'Times New Roman',Times,serif">  <div align="left" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left"> </div> <div align="left" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 1 – Summary of significant accounting policies</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Our significant accounting policies, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted from this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, we believe the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading when read in conjunction with the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. For a full description of our accounting policies, refer to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     We believe the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the Unaudited Consolidated Balance Sheet at March 31, 2010, the Unaudited Consolidated Statement of Operations for the three months ended March 31, 2010 and 2009, the Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2010, and the Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and 2009. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 2 – Fair value measurements</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Financial Accounting Standards Board (“FASB”) guidance regarding fair value measurement establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices for similar assets and liabilities in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Financial assets accounted for at fair value on a recurring basis at March 31, 2010 and December 31, 2009 include cash equivalents of $1,335.2 million and $909.8 million, restricted cash and investments of $10.0 million and $9.1 million, and trading securities of $12.0 million and $11.4 million (included in other assets), respectively. These assets are carried at fair value based on quoted market prices for identical securities (Level 1 inputs). Cash equivalents include investments in AAA-rated money market mutual funds with weighted average maturities of less than 90 days. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of December 31, 2009, short-term investments included our investment in the Reserve Primary Fund (the “Primary Fund”), which is a money market fund. We recognized an unrealized loss of $2.0 million in the third quarter of 2008, when the net asset value of the Primary Fund decreased below $1 per share. We have received cash distributions from the Primary Fund totaling $48.7 million since the third quarter of 2008, including a $3.3 million receipt during the first quarter of 2010. Upon receipt of this cash distribution, we recognized a gain of $1.4 million, which is recorded in interest income, and reduced the net balance of the investment to zero. The estimated fair value of our investment in the Primary Fund was $1.9 million as of December 31, 2009. We assessed the fair value of the underlying collateral for the Primary Fund through evaluation of the liquidation value of assets held by the Primary Fund, which is classified within Level 3 of the fair value hierarchy. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The carrying value of cash and cash equivalents, accounts receivable, claims and rebates payable, and accounts payable approximated fair values due to the short-term maturities of these instruments. The fair value, which approximates the carrying value, of our bank credit facility was estimated using either quoted market prices or the current rates offered to us for debt with similar maturity. The carrying values and the fair values of our senior notes are shown in the following table: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #ffffff"><b>March 31, 2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #ffffff"><b>December 31, 2009</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>Value</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>Value</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">5.25% senior notes due 2012, net of unamortized discount </div></td> <td> </td> <td align="left">$</td> <td align="right">999.4</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,065.0</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">999.4</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,068.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">6.25% senior notes due 2014, net of unamortized discount </div></td> <td> </td> <td> </td> <td align="right">996.3</td> <td> </td> <td> </td> <td> </td> <td align="right">1,107.5</td> <td> </td> <td> </td> <td> </td> <td align="right">996.1</td> <td> </td> <td> </td> <td> </td> <td align="right">1,095.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">7.25% senior notes due 2019, net of unamortized discount </div></td> <td> </td> <td> </td> <td align="right">496.9</td> <td> </td> <td> </td> <td> </td> <td align="right">580.6</td> <td> </td> <td> </td> <td> </td> <td align="right">496.8</td> <td> </td> <td> </td> <td> </td> <td align="right">591.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td style="border-top: 1px solid #000000"> </td> <td style="border-top: 1px solid #000000"> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td style="border-top: 1px solid #000000"> </td> <td style="border-top: 1px solid #000000"> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">2,492.6</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,753.1</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,492.3</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,755.9</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fair values of our senior notes were estimated based on quoted prices in active markets for identical securities (Level 1 inputs). In determining the fair value of liabilities, we took into consideration the risk of nonperformance. Nonperformance risk refers to the risk that the obligation will not be fulfilled and affects the value at which the liability would be transferred to a market participant. This risk did not have a material impact on the fair value of our liabilities. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 3 – Acquisition</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On December 1, 2009, we completed the purchase of 100% of the shares and equity interests of certain subsidiaries of WellPoint, Inc. (“WellPoint”) that provide pharmacy benefit management services (“NextRx” or the “NextRx PBM Business”), in exchange for total consideration of $4.675 billion paid in cash, which is subject to a purchase price adjustment for working capital. The purchase price adjustment for working capital was finalized in the second quarter of 2010 and did not have a material impact. The NextRx PBM Business is a national provider of PBM services, and we believe the acquisition will enhance our ability to achieve cost savings, innovations, and operational efficiencies which will benefit our customers and stockholders. The purchase price was primarily funded through a $2.5 billion underwritten public offering of senior notes completed on June 9, 2009 resulting in net proceeds of $2,478.3 million, and a public offering of 26.45 million shares of common stock completed June 10, 2009 resulting in net proceeds of $1,569.1 million. This acquisition is reported as part of our PBM segment. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The parties have agreed to make an election under Section 338(h)(10) of the Internal Revenue Code with respect to the transaction which results in the goodwill and other intangibles generated being tax deductible over 15 years. We estimate the value of such election to us to be between $800 million and $1.2 billion dependent upon the discount factor and tax rate assumed. Additionally, at the closing of the acquisition, we entered into a 10-year contract with WellPoint (the “PBM agreement”) under which we will provide pharmacy benefits management services to WellPoint and its designated affiliates which were previously provided by NextRx. The services provided under the PBM Agreement include retail network pharmacy management, home delivery and specialty pharmacy services, drug formulary management, claims adjudication and other services consistent with those provided to other PBM clients. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following unaudited pro forma information presents a summary of our combined results of operations and those of the NextRx PBM Business for the three months ended March 31, 2009 as if the acquisition and financing transactions had occurred at January 1, 2009, along with certain pro forma adjustments to give effect to amortization of other intangible assets, interest expense on acquisition debt and other adjustments. This information is presented with actual results from the three months ended March 31, 2010 for comparative purposes. The following pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the PBM business: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><b>March 31,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><b><i>(in millions, except per share data)</i></b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total revenues </div></td> <td> </td> <td align="right">$</td> <td align="right">11,143.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9,372.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net income from continuing operations </div></td> <td> </td> <td> </td> <td align="right">260.2</td> <td> </td> <td> </td> <td> </td> <td align="right">235.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Basic earnings per share from continuing operations </div></td> <td> </td> <td> </td> <td align="right">0.95</td> <td> </td> <td> </td> <td> </td> <td align="right">0.86</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Diluted earnings per share from continuing operations </div></td> <td> </td> <td align="right">$</td> <td align="right">0.94</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">0.86</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The purchase price has been preliminarily allocated based upon the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition. Because information may become available within the measurement period (one year from the date of acquisition) which indicates a potential change to these valuations, the purchase price allocation is subject to change. The Company expects to finalize the allocation of the purchase price prior to or during the fourth quarter of 2010. The components of the preliminary purchase price allocation for NextRx are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><b>Allocation of Purchase Price (in millions):</b></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="left">$</td> <td align="right">937.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Property and equipment </div></td> <td> </td> <td> </td> <td align="right">42.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Acquired intangible assets </div></td> <td> </td> <td> </td> <td align="right">1,585.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">2,688.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities assumed </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(577.9</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">4,675.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The values of the tangible net assets in the above table are representative of the fair values of those assets and liabilities. The current assets of $937.0 million are primarily comprised of pharmaceutical manufacturer rebate receivables, which have historically experienced better collection rates than other customer trade receivables. As a result, the allowance for doubtful accounts related to these receivables is lower than our book of business average. The liabilities assumed of $577.9 million are primarily comprised of rebates payable to clients. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A portion of the excess of purchase price over tangible net assets acquired has been preliminarily allocated to intangible assets consisting of customer contracts in the amount of $1,585.0 million. These assets are included in other intangible assets on the unaudited consolidated balance sheet. The excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $2,688.2 million. The goodwill is the result of synergies derived from our ability to drive growth in generic and mail order utilization and supply chain savings from both drug manufacturers and the retail network. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 4 – Goodwill and other intangible assets </b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following is a summary of our goodwill and other intangible assets (amounts in millions) for our two reportable segments PBM and Emerging Markets (“EM”): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>March 31, 2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31, 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Gross</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Net</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Gross</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Net</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accumulated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accumulated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amortization</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amortization</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">PBM </div></td> <td> </td> <td align="right">$</td> <td align="right">5,474.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,367.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,472.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.3</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,364.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">EM </div></td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">5,628.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,521.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,626.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.3</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,519.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">PBM </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Customer contracts </div></td> <td> </td> <td align="right">$</td> <td align="right">2,018.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(235.0</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,783.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,018.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(197.8</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,820.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Other<sup style="font-size: 85%; vertical-align: text-top"> </sup> </div></td> <td> </td> <td> </td> <td align="right">27.9</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(12.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">15.7</td> <td> </td> <td> </td> <td> </td> <td align="right">27.9</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(10.9</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">17.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">2,046.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(247.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,799.2</td> <td> </td> <td> </td> <td> </td> <td align="right">2,046.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(208.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,837.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">EM </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Customer relationships </div></td> <td> </td> <td> </td> <td align="right">72.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(31.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">40.9</td> <td> </td> <td> </td> <td> </td> <td align="right">72.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(29.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">42.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">74.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(31.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">43.3</td> <td> </td> <td> </td> <td> </td> <td align="right">74.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(29.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">45.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total other intangible assets </div></td> <td> </td> <td align="right">$</td> <td align="right">2,121.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(278.7</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,842.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,121.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(238.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,882.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The aggregate amount of amortization expense of other intangible assets for our continuing operations was $40.1 million and $9.3 million for the three months ended March 31, 2010 and 2009, respectively. In accordance with applicable accounting guidance, amortization for customer contracts related to the PBM agreement has been included as an offset to revenues in the amount of $28.5 million for the three months ended March 31, 2010. The future aggregate amount of amortization expense of other intangible assets for our continuing operations is expected to be approximately $159.7 million for 2010, $157.9 million for 2011, $157.1 million for 2012, $156.5 million for 2013, and $152.1 million for 2014. The weighted average amortization period of intangible assets subject to amortization is 15 years in total, and by major intangible class is 5 to 20 years for customer-related intangibles and 3 to 10 years for other intangible assets. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A summary of the change in the net carrying value of goodwill by business segment is shown in the following table: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff">PBM</td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff">EM</td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff">Total</td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2009 </div></td> <td> </td> <td> </td> <td align="right">5,364.8</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">5,519.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Adjustment to purchase price allocation<sup style="font-size: 85%; vertical-align: text-top">(1)</sup> </div></td> <td> </td> <td> </td> <td align="right">1.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign currency translation and other </div></td> <td> </td> <td> </td> <td align="right">0.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">0.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2010 </div></td> <td> </td> <td align="left">$</td> <td align="right">5,367.0</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">154.4</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5,521.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>Represents adjustments to preliminary assignment of fair value to net assets acquired for NextRx.</td> </tr> </table> <div align="left" style="font-size: 10pt; margin-top: 6pt">     See Note 3 for further information on goodwill related to recent acquisitions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During the first quarter of 2010, we received notification of a client contract loss in one of our smaller EM lines of business. The client contract will remain in effect through December 31, 2010. As a result of this client loss, we reassessed carrying values of assets and liabilities in this business unit in the first quarter of 2010. We are currently assessing the strategic options for this business. Based on the assessment of these options, we have concluded that there was no goodwill impairment as of March 31, 2010. As circumstances change, we will continue to re-evaluate the fair value of the business' assets as compared to the carrying values and there still exists the possibility of an impairment charge in 2010. As of March 31, 2010, the total assets for this business were $39.8 million which includes goodwill and intangible assets of $23.8 million. During the annual impairment analysis in 2009, this reporting unit's fair value was in excess of its carrying value by approximately 100%. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During 2009, the valuations of two other reporting units in our EM segment yielded fair values which were less than 20% in excess of their carrying value and we concluded that no impairment existed since their fair value exceeded their carrying value. As of March 31, 2010, the total assets which include goodwill and the intangible assets of these two reporting units were approximately $370.0 million and $28.0 million, respectively. During the first quarter of 2010, there have been no events or circumstances relative to these reporting units that would require a re-evaluation of the fair value of the EM segment assets as compared to the carrying values. The fair value of both reporting units was determined using the income approach whereby estimated future discounted cash flows are used to develop fair value. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 5 – Earnings per share </b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Basic earnings per share (“EPS”) is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed in the same manner as basic earnings per share but adds the number of additional common shares that would have been outstanding for the period if the dilutive potential common shares had been issued. The following is the reconciliation between the number of weighted average shares used in the basic and diluted EPS calculations for all periods: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><b>March 31,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2010</b><sup style="font-size: 85%; vertical-align: text-top">(1)</sup></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average number of common shares outstanding during the period – Basic EPS<sup style="font-size: 85%; vertical-align: text-top"><b>(2)</b></sup> </div></td> <td> </td> <td> </td> <td align="right">274.9</td> <td> </td> <td> </td> <td> </td> <td align="right">247.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Dilutive common stock equivalents: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Outstanding stock options, “stock-settled” stock appreciation rights (“SSRs”), restricted stock units, and executive deferred compensation units<sup style="font-size: 85%; vertical-align: text-top"><b>(2)</b></sup> </div></td> <td> </td> <td> </td> <td align="right">3.0</td> <td> </td> <td> </td> <td> </td> <td align="right">1.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average number of common shares outstanding during the period – Diluted EPS<sup style="font-size: 85%; vertical-align: text-top"><b>(2)</b></sup> </div></td> <td> </td> <td> </td> <td align="right">277.9</td> <td> </td> <td> </td> <td> </td> <td align="right">249.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>The increase in weighted average number of common shares outstanding for the three months ended March 31, 2010 for Basic and Diluted EPS resulted from the 26.45 million shares issued in the common stock offering on June 10, 2009 (see Note 7).</td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(2)</td> <td> </td> <td>Excludes awards of 1.4 million and 4.4 million for the three months ended March 31, 2010 and 2009, respectively. These were excluded because their effect was anti-dilutive.</td> </tr> </table> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The above shares are all calculated under the “treasury stock” method. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 6 – Financing</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Long-term debt consists of: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>March 31,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Term A loans due October 14, 2010 with an average interest rate of 0.9% at March 31, 2010 </div></td> <td> </td> <td align="right">$</td> <td align="right">360.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">540.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Term-1 loans due October 14, 2010 with an average interest rate of 0.8% at March 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">800.0</td> <td> </td> <td> </td> <td> </td> <td align="right">800.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">5.25% senior notes due 2012, net of unamortized discount </div></td> <td> </td> <td> </td> <td align="right">999.4</td> <td> </td> <td> </td> <td> </td> <td align="right">999.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">6.25% senior notes due 2014, net of unamortized discount </div></td> <td> </td> <td> </td> <td align="right">996.3</td> <td> </td> <td> </td> <td> </td> <td align="right">996.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">7.25% senior notes due 2019, net of unamortized discount </div></td> <td> </td> <td> </td> <td align="right">496.9</td> <td> </td> <td> </td> <td> </td> <td align="right">496.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Revolving credit facility due October 14, 2010 </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total debt </div></td> <td> </td> <td> </td> <td align="right">3,652.9</td> <td> </td> <td> </td> <td> </td> <td align="right">3,832.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Less current maturities </div></td> <td> </td> <td> </td> <td align="right">1,160.1</td> <td> </td> <td> </td> <td> </td> <td align="right">1,340.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Long-term debt </div></td> <td> </td> <td align="right">$</td> <td align="right">2,492.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,492.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At March 31, 2010 our credit facility includes $360.0 million of Term A loans, $800.0 million of Term-1 loans and a $600.0 million revolving credit facility. The revolving credit facility (none of which was outstanding as of March 31, 2010) is available for general corporate purposes. During the first three months of 2010, we made scheduled payments of $180.0 million on the Term A loan. We anticipate that the current cash balances and the cash flow from operations will be sufficient to re-pay the principal balances when due and make our scheduled payments for those contractual obligations and capital commitments included in our Annual Report on Form 10-K for the year ended December 31, 2009. While it is our current intention to re-pay these loans when due, we may enter into a new loan facility to provide additional liquidity. At March 31, 2010, our remaining Term A loans and Term-1 loans obligation is $1,160.0 million and our cash and cash equivalents are $1,443.1 million. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The credit facility requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin over LIBOR will range from 0.50% to 1.125%, depending on our consolidated leverage ratio or our credit rating. Under the credit facility we are required to pay commitment fees on the unused portion of the $600.0 million revolving credit facility. The commitment fee will range from 0.10% to 0.25% depending on our consolidated leverage ratio or our credit rating. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At March 31, 2010, the weighted average interest rate on the facility was 0.8%. The credit facility contains covenants which limit the indebtedness we may incur, the common shares we may repurchase, and dividends we may pay. The repurchase and dividend covenant applies if certain leverage thresholds are exceeded. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At March 31, 2010, we believe we were in compliance in all material respects with all covenants associated with our credit facility. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On June 9, 2009, we issued $2.5 billion of senior notes, including $1.0 billion aggregate principal amount of 5.25% senior notes due 2012; $1.0 billion aggregate principal amount of 6.25% senior notes due 2014 and $500 million aggregate principal amount of 7.25% senior notes due 2019. The senior notes require interest to be paid semi-annually on June 15<sup style="font-size: 85%; vertical-align: text-top"> </sup>and December 15. We may redeem some or all of each series of senior notes prior to maturity at a price equal to the greater of (1) 100% of the aggregate principal amount of any notes being redeemed, plus accrued and unpaid interest; or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, not including unpaid interest accrued to the redemption date, discounted to the redemption date on a semiannual basis at the treasury rate plus 50 basis points with respect to any 2012 notes, 2014 notes and 2019 notes being redeemed, plus in each case, unpaid interest on the notes being redeemed accrued to the redemption date. The senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by most of our current and future 100% owned domestic subsidiaries. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Financing costs of $13.3 million, for the issuance of the senior notes, are being amortized over an average weighted period of 5.2 years and are reflected in other intangible assets, net in the accompanying unaudited consolidated balance sheet. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business (see Note 3). </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 7 – Common stock</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On June 10, 2009, we completed a public offering of 26.45 million shares of common stock, which includes 3.45 million shares sold as a result of the underwriters’ exercise of their overallotment option in full at closing, at a price of $61.00 per share. The sale resulted in net proceeds of $1,569.1 million after giving effect to the underwriting discount and issuance costs of $44.4 million. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business (see Note 3). </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 8 – Stock-based compensation plans </b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under our stock-based compensation plans, we have issued stock options, stock-settled stock appreciation rights (“SSRs”), restricted stock awards, restricted stock units, and performance share awards. Awards are typically settled using treasury shares. The maximum contractual term of stock options and SSRs granted under the 2000 Long Term Incentive Plan (“LTIP”) is 10 years. Due to the nature of the awards, we use the same valuation methods and accounting treatments for SSRs and stock options. During the first three months of 2010, we granted 1,184,000 stock options with a weighted average fair market value of $31.95. The SSRs and stock options have three-year graded vesting. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During the first three months of 2010, we granted to certain officers and employees approximately 131,000 restricted stock units and performance shares with a weighted average fair market value of $98.99. The restricted stock units have three-year graded vesting and the performance shares cliff vest at the end of the three years. The number of performance shares that ultimately vest is dependent upon achieving specific performance targets. Prior to vesting, these shares are subject to forfeiture to us without consideration upon termination of employment under certain circumstances. The original value of the performance share grants is subject to a multiplier of 2.5 based on certain performance metrics. During the first quarter of 2010, approximately 106,000 additional performance shares were granted to certain officers for exceeding certain performance metrics. The total number of non-vested restricted stock and performance share awards was 530,000 at March 31, 2010 and 600,000 at December 31, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     We recognized stock-based compensation expense of $11.9 million and $9.6 million in the three months ended March 31, 2010 and 2009, respectively. Unamortized stock-based compensation as of March 31, 2010 was $46.8 million for stock options and SSRs and $24.1 million for restricted stock and performance shares. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fair value of options and SSRs granted is estimated on the date of grant using a Black-Scholes multiple option-pricing model with the following weighted average assumptions: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="58%"> </td> <td width="5%"> </td> <td width="16%"> </td> <td width="5%"> </td> <td width="16%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Three Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>March 31,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #ffffff"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #ffffff"><b>2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="5" valign="top" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Expected life of option </div></td> <td> </td> <td align="center" valign="top">3-5 years </td> <td> </td> <td align="center" valign="top">3-5 years</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Risk-free interest rate </div></td> <td> </td> <td align="center" valign="top">1.3%-2.3% </td> <td> </td> <td align="center" valign="top">1.3%-1.9%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Expected volatility of stock </div></td> <td> </td> <td align="center" valign="top">37%-40% </td> <td> </td> <td align="center" valign="top">35%-39%</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Expected dividend yield </div></td> <td> </td> <td align="center" valign="top">None </td> <td> </td> <td align="center" valign="top">None</td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 9 – Contingencies</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     We accrue self-insurance reserves based upon estimates of the aggregate liability of claim costs in excess of our insurance coverage. Reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience. The majority of these claims are legal claims and our liability estimate is primarily related to the cost to defend these claims. We do not accrue for settlements, judgments, monetary fines or penalties until such amounts are probable and estimable. Under authoritative FASB guidance, if the range of possible loss is broad, the liability accrued should be based on the lower end of the range. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In the ordinary course of business there have arisen various legal proceedings, investigations or claims now pending against us or our subsidiaries. The effect of these actions on future financial results is not subject to reasonable estimation because considerable uncertainty exists about the outcomes. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     While we believe our services and business practices are in compliance with applicable laws, rules and regulations in all material respects, we cannot predict the outcome of any such legal proceedings, investigations or claims at this time. An unfavorable outcome in one or more of these matters could result in the imposition of judgments, monetary fines or penalties, or injunctive or administrative remedies. We can give no assurance that such judgments, fines and remedies, and future costs associated with any such matters, would not have a material adverse effect on our financial condition, our consolidated results of operations or our consolidated cash flows. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 10 – Segment information</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     We report segments on the basis of services offered and have determined we have two reportable segments: PBM and EM. Our domestic and Canadian PBM operating segments have similar characteristics and as such have been aggregated into a single PBM reporting segment. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During the first quarter of 2010, we received notification of a client contract loss in one of our smaller EM lines of business. The client contract will remain in effect through December 31, 2010. As a result of this client loss, we reassessed carrying values of assets and liabilities in this business unit in the first quarter of 2010. We are currently assessing the strategic options for this business. Based on the assessment of these options, we have concluded that there was no goodwill impairment as of March 31, 2010. As circumstances change, we will continue to re-evaluate the fair value of the business' assets as compared to the carrying values and there still exists the possibility of an impairment charge in 2010. As of March 31, 2010, the total assets for this business were $39.8 million which includes goodwill and intangible assets of $23.8 million. During the annual impairment analysis in 2009, this reporting unit's fair value was in excess of its carrying value by approximately 100%. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During 2009, the valuations of two other reporting units in our EM segment yielded fair values which were less than 20% in excess of their carrying value and we concluded that no impairment existed since their fair value exceeded their carrying value. As of March 31, 2010, the total assets which include goodwill and the intangible assets of these two reporting units were approximately $370.0 million and $28.0 million, respectively. During the first quarter of 2010, there have been no events or circumstances relative to these reporting units that would require a re-evaluation of the fair value of the EM segment assets as compared to the carrying values. The fair value of both reporting units was determined using the income approach whereby estimated future discounted cash flows are used to develop fair value. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Operating income is the measure used by our chief operating decision maker to assess the performance of each of our operating segments. The following table presents information about our reportable segments for the three months ended March 31, 2010 and 2009. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><b><i>(in millions)</i></b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>PBM</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>EM</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>For the three months ended March 31, 2010</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Product revenue: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Network revenues<sup style="font-size: 85%; vertical-align: text-top">(1)</sup> </div></td> <td> </td> <td align="left">$</td> <td align="right">7,521.5</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7,521.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Home delivery and specialty revenues<sup style="font-size: 85%; vertical-align: text-top">(2)</sup> </div></td> <td> </td> <td> </td> <td align="right">3,230.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">3,230.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other revenues </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">324.1</td> <td> </td> <td> </td> <td> </td> <td align="right">324.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Service revenues </div></td> <td> </td> <td> </td> <td align="right">59.3</td> <td> </td> <td> </td> <td> </td> <td align="right">8.4</td> <td> </td> <td> </td> <td> </td> <td align="right">67.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total revenues </div></td> <td> </td> <td> </td> <td align="right">10,811.4</td> <td> </td> <td> </td> <td> </td> <td align="right">332.5</td> <td> </td> <td> </td> <td> </td> <td align="right">11,143.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Depreciation and amortization expense </div></td> <td> </td> <td> </td> <td align="right">56.7</td> <td> </td> <td> </td> <td> </td> <td align="right">3.0</td> <td> </td> <td> </td> <td> </td> <td align="right">59.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating income </div></td> <td> </td> <td> </td> <td align="right">450.6</td> <td> </td> <td> </td> <td> </td> <td align="right">3.5</td> <td> </td> <td> </td> <td> </td> <td align="right">454.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest income </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(42.8</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income before income taxes </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">413.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Capital expenditures </div></td> <td> </td> <td> </td> <td align="right">33.5</td> <td> </td> <td> </td> <td> </td> <td align="right">0.7</td> <td> </td> <td> </td> <td> </td> <td align="right">34.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>For the three months ended March 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Product revenue: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Network revenues<sup style="font-size: 85%; vertical-align: text-top">(1)</sup> </div></td> <td> </td> <td align="left">$</td> <td align="right">3,250.6</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">3,250.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Home delivery and specialty revenues </div></td> <td> </td> <td> </td> <td align="right">1,797.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,797.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Other revenues </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">300.0</td> <td> </td> <td> </td> <td> </td> <td align="right">300.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Service revenues </div></td> <td> </td> <td> </td> <td align="right">64.1</td> <td> </td> <td> </td> <td> </td> <td align="right">10.3</td> <td> </td> <td> </td> <td> </td> <td align="right">74.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total revenues </div></td> <td> </td> <td> </td> <td align="right">5,112.5</td> <td> </td> <td> </td> <td> </td> <td align="right">310.3</td> <td> </td> <td> </td> <td> </td> <td align="right">5,422.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Depreciation and amortization expense </div></td> <td> </td> <td> </td> <td align="right">21.4</td> <td> </td> <td> </td> <td> </td> <td align="right">3.2</td> <td> </td> <td> </td> <td> </td> <td align="right">24.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Operating income </div></td> <td> </td> <td> </td> <td align="right">351.7</td> <td> </td> <td> </td> <td> </td> <td align="right">3.8</td> <td> </td> <td> </td> <td> </td> <td align="right">355.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest income </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">0.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(17.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Income before income taxes </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">339.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Capital expenditures </div></td> <td> </td> <td> </td> <td align="right">13.4</td> <td> </td> <td> </td> <td> </td> <td align="right">0.2</td> <td> </td> <td> </td> <td> </td> <td align="right">13.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000">   </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>Includes retail pharmacy co-payments of $1,662.6 million and $822.7 million for the three months ended March 31, 2010 and 2009, respectively.</td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(2)</td> <td> </td> <td>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.</td> </tr> </table> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following table presents balance sheet information about our reportable segments: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>PBM</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>EM</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>As of March 31, 2010</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="left">$</td> <td align="right">11,289.3</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">509.6</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">11,798.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Investment in equity method investees </div></td> <td> </td> <td> </td> <td align="right">4.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">4.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>As of December 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="left">$</td> <td align="right">11,560.3</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">370.9</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">11,931.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Investment in equity method investees </div></td> <td> </td> <td> </td> <td align="right">4.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">4.1</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     PBM product revenue consists of revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks and revenues from the dispensing of prescription drugs from our home delivery and specialty pharmacies. EM product revenues consist of distribution of certain fertility drugs and revenues from drug distribution services. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     PBM service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, market research programs, informed decision counseling services, and specialty distribution services. EM service revenue includes revenues from sample distribution, accountability services, and healthcare account administration. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Revenues earned by our Canadian PBM totaled $12.2 million and $10.8 million for the three months ended March 31, 2010 and 2009, respectively. All other revenues were earned in the United States. Long-lived assets of our Canadian PBM (consisting primarily of fixed assets) totaled $14.7 million and $15.2 million as of March 31, 2010 and December 31, 2009, respectively. All other long-lived assets are domiciled in the United States. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 11 – Condensed consolidating financial information </b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Our senior notes are jointly and severally and fully and unconditionally guaranteed by our 100% owned domestic subsidiaries, other than certain regulated subsidiaries including Express Scripts Insurance Company. The following condensed consolidating financial information has been prepared in accordance with the requirements for presentation of such information. Effective June 30, 2008, CuraScript Infusion Pharmacy, Inc. was sold. The assets, liabilities, and operations from this former subsidiary are included as discontinued operations in those of the non-guarantors. Subsequent to the acquisition of NextRx, the assets, liabilities and operations of the 100% owned domestic subsidiaries have been included in those of the guarantors. The following presents the condensed consolidating financial information separately for: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="1%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(i)</td> <td width="1%"> </td> <td>Express Scripts, Inc. (the Parent Company), the issuer of the guaranteed obligations;</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="1%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(ii)</td> <td width="1%"> </td> <td>Guarantor subsidiaries, on a combined basis, as specified in the indentures related to Express Scripts’ obligations under the notes;</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="1%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(iii)</td> <td width="1%"> </td> <td>Non-guarantor subsidiaries, on a combined basis;</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="1%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(iv)</td> <td width="1%"> </td> <td>Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries; and</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="1%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(v)</td> <td width="1%"> </td> <td>Express Scripts, Inc. and subsidiaries on a consolidated basis.</td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Condensed Consolidating Balance Sheet</b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Express</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Non-</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Scripts, Inc.</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Guarantors</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Guarantors</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Eliminations</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>As of March 31, 2010</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents </div></td> <td> </td> <td align="right">$</td> <td align="right">1,333.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">40.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">69.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,443.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Restricted cash and investments </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">8.4</td> <td> </td> <td> </td> <td> </td> <td align="right">1.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">10.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Receivables, net </div></td> <td> </td> <td> </td> <td align="right">1,249.0</td> <td> </td> <td> </td> <td> </td> <td align="right">861.7</td> <td> </td> <td> </td> <td> </td> <td align="right">10.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2,121.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other current assets </div></td> <td> </td> <td> </td> <td align="right">98.5</td> <td> </td> <td> </td> <td> </td> <td align="right">362.9</td> <td> </td> <td> </td> <td> </td> <td align="right">3.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">465.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="right">$</td> <td align="right">2,680.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,273.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">85.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,039.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Property and equipment, net </div></td> <td> </td> <td> </td> <td align="right">239.9</td> <td> </td> <td> </td> <td> </td> <td align="right">112.5</td> <td> </td> <td> </td> <td> </td> <td align="right">10.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">362.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Investments in subsidiaries </div></td> <td> </td> <td> </td> <td align="right">6,038.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(6,038.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Intercompany </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,863.6</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,960.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(96.9</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">2,940.6</td> <td> </td> <td> </td> <td> </td> <td align="right">2,555.2</td> <td> </td> <td> </td> <td> </td> <td align="right">25.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">5,521.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets, net </div></td> <td> </td> <td> </td> <td align="right">1,513.5</td> <td> </td> <td> </td> <td> </td> <td align="right">324.8</td> <td> </td> <td> </td> <td> </td> <td align="right">4.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,842.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other assets </div></td> <td> </td> <td> </td> <td align="right">21.8</td> <td> </td> <td> </td> <td> </td> <td align="right">8.7</td> <td> </td> <td> </td> <td> </td> <td align="right">2.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">32.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="right">$</td> <td align="right">10,571.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,235.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">30.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(6,038.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">11,798.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Claims and rebates payable </div></td> <td> </td> <td align="right">$</td> <td align="right">2,181.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">465.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,647.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accounts payable </div></td> <td> </td> <td> </td> <td align="right">703.4</td> <td> </td> <td> </td> <td> </td> <td align="right">30.4</td> <td> </td> <td> </td> <td> </td> <td align="right">3.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">736.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued expenses </div></td> <td> </td> <td> </td> <td align="right">306.6</td> <td> </td> <td> </td> <td> </td> <td align="right">331.9</td> <td> </td> <td> </td> <td> </td> <td align="right">7.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">645.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current maturities of long-term debt </div></td> <td> </td> <td> </td> <td align="right">1,160.0</td> <td> </td> <td> </td> <td> </td> <td align="right">0.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,160.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Current liabilities </div></td> <td> </td> <td align="right">$</td> <td align="right">4,351.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">827.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">10.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,189.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Long-term debt </div></td> <td> </td> <td> </td> <td align="right">2,492.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2,492.8</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other liabilities </div></td> <td> </td> <td> </td> <td align="right">79.9</td> <td> </td> <td> </td> <td> </td> <td align="right">378.0</td> <td> </td> <td> </td> <td> </td> <td align="right">11.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">469.6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Stockholders’ equity </div></td> <td> </td> <td> </td> <td align="right">3,647.0</td> <td> </td> <td> </td> <td> </td> <td align="right">6,029.5</td> <td> </td> <td> </td> <td> </td> <td align="right">8.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(6,038.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">3,647.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total liabilities and stockholders’ equity </div></td> <td> </td> <td align="right">$</td> <td align="right">10,571.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,235.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">30.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(6,038.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">11,798.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>As of December 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents </div></td> <td> </td> <td align="right">$</td> <td align="right">1,005.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">10.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">55.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,070.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Restricted cash and investments </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">7.5</td> <td> </td> <td> </td> <td> </td> <td align="right">1.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">9.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Receivables, net </div></td> <td> </td> <td> </td> <td align="right">1,179.8</td> <td> </td> <td> </td> <td> </td> <td align="right">1,331.5</td> <td> </td> <td> </td> <td> </td> <td align="right">9.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2,521.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other current assets </div></td> <td> </td> <td> </td> <td align="right">196.0</td> <td> </td> <td> </td> <td> </td> <td align="right">341.2</td> <td> </td> <td> </td> <td> </td> <td align="right">5.6</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">542.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="right">$</td> <td align="right">2,380.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,690.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">72.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4,143.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Property and equipment, net </div></td> <td> </td> <td> </td> <td align="right">239.6</td> <td> </td> <td> </td> <td> </td> <td align="right">103.5</td> <td> </td> <td> </td> <td> </td> <td align="right">11.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">354.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Investments in subsidiaries </div></td> <td> </td> <td> </td> <td align="right">5,970.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(5,970.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Intercompany </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2,387.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,467.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(80.3</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">2,939.2</td> <td> </td> <td> </td> <td> </td> <td align="right">2,555.2</td> <td> </td> <td> </td> <td> </td> <td align="right">24.8</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">5,519.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets, net </div></td> <td> </td> <td> </td> <td align="right">1,543.9</td> <td> </td> <td> </td> <td> </td> <td align="right">334.4</td> <td> </td> <td> </td> <td> </td> <td align="right">4.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,882.6</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other assets </div></td> <td> </td> <td> </td> <td align="right">21.3</td> <td> </td> <td> </td> <td> </td> <td align="right">8.6</td> <td> </td> <td> </td> <td> </td> <td align="right">1.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">31.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total assets </div></td> <td> </td> <td align="right">$</td> <td align="right">10,707.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,159.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">34.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(5,970.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">11,931.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Claims and rebates payable </div></td> <td> </td> <td align="right">$</td> <td align="right">2,264.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">586.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,850.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accounts payable </div></td> <td> </td> <td> </td> <td align="right">674.4</td> <td> </td> <td> </td> <td> </td> <td align="right">29.5</td> <td> </td> <td> </td> <td> </td> <td align="right">3.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">706.9</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued expenses </div></td> <td> </td> <td> </td> <td align="right">312.7</td> <td> </td> <td> </td> <td> </td> <td align="right">228.4</td> <td> </td> <td> </td> <td> </td> <td align="right">11.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">552.4</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current maturities of long-term debt </div></td> <td> </td> <td> </td> <td align="right">1,340.0</td> <td> </td> <td> </td> <td> </td> <td align="right">0.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,340.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Current liabilities of discontinued operations </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">6.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">6.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Current liabilities </div></td> <td> </td> <td align="right">$</td> <td align="right">4,591.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">844.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">21.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,456.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Long-term debt </div></td> <td> </td> <td> </td> <td align="right">2,492.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2,492.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other liabilities </div></td> <td> </td> <td> </td> <td align="right">72.1</td> <td> </td> <td> </td> <td> </td> <td align="right">356.3</td> <td> </td> <td> </td> <td> </td> <td align="right">1.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">430.1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Stockholders’ equity </div></td> <td> </td> <td> </td> <td align="right">3,551.8</td> <td> </td> <td> </td> <td> </td> <td align="right">5,958.7</td> <td> </td> <td> </td> <td> </td> <td align="right">11.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(5,970.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">3,551.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total liabilities and stockholders’ equity </div></td> <td> </td> <td align="right">$</td> <td align="right">10,707.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7,159.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">34.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(5,970.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">11,931.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Condensed Consolidating Statement of Operations</b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Express</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Non-</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Scripts, Inc.</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Guarantors</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Guarantors</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Eliminations</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>For the three months ended</b> <b>March 31, 2010</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Revenues </div></td> <td> </td> <td align="right">$</td> <td align="right">7,394.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,728.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">21.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">11,143.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating expenses </div></td> <td> </td> <td> </td> <td align="right">7,051.6</td> <td> </td> <td> </td> <td> </td> <td align="right">3,614.0</td> <td> </td> <td> </td> <td> </td> <td align="right">24.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">10,689.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Operating income (loss) </div></td> <td> </td> <td> </td> <td align="right">342.9</td> <td> </td> <td> </td> <td> </td> <td align="right">114.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">454.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(39.6</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(41.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Income (loss) before income taxes </div></td> <td> </td> <td> </td> <td align="right">303.3</td> <td> </td> <td> </td> <td> </td> <td align="right">112.7</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">413.0</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Provision for income taxes </div></td> <td> </td> <td> </td> <td align="right">110.3</td> <td> </td> <td> </td> <td> </td> <td align="right">42.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">152.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net income (loss) from continuing operations </div></td> <td> </td> <td> </td> <td align="right">193.0</td> <td> </td> <td> </td> <td> </td> <td align="right">70.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(3.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">260.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Equity in earnings of subsidiaries </div></td> <td> </td> <td> </td> <td align="right">67.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(67.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net income (loss) </div></td> <td> </td> <td align="right">$</td> <td align="right">260.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">70.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(3.0</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(67.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">260.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>For the three months ended March 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Revenues </div></td> <td> </td> <td align="right">$</td> <td align="right">3,169.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,236.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">17.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,422.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating expenses </div></td> <td> </td> <td> </td> <td align="right">2,901.3</td> <td> </td> <td> </td> <td> </td> <td align="right">2,151.8</td> <td> </td> <td> </td> <td> </td> <td align="right">14.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">5,067.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Operating income </div></td> <td> </td> <td> </td> <td align="right">268.2</td> <td> </td> <td> </td> <td> </td> <td align="right">84.4</td> <td> </td> <td> </td> <td> </td> <td align="right">2.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">355.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(13.5</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2.2</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(16.2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Income before income taxes </div></td> <td> </td> <td> </td> <td align="right">254.7</td> <td> </td> <td> </td> <td> </td> <td align="right">82.2</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">339.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Provision for income taxes </div></td> <td> </td> <td> </td> <td align="right">92.4</td> <td> </td> <td> </td> <td> </td> <td align="right">31.3</td> <td> </td> <td> </td> <td> </td> <td align="right">0.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">124.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net income from continuing operations </div></td> <td> </td> <td> </td> <td align="right">162.3</td> <td> </td> <td> </td> <td> </td> <td align="right">50.9</td> <td> </td> <td> </td> <td> </td> <td align="right">1.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">214.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net loss from discontinued operations, net of tax </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.3</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Equity earnings of subsidiaries </div></td> <td> </td> <td> </td> <td align="right">52.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(52.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net income (loss) </div></td> <td> </td> <td align="right">$</td> <td align="right">214.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">50.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(52.1</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">214.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Condensed Consolidating Statement of Cash Flows</b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Express</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Non-</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Scripts, Inc.</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Guarantors</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Guarantors</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Eliminations</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Consolidated</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>For the three months ended</b> <b>March 31, 2010</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash flows provided by (used in) operating activities </div></td> <td> </td> <td align="right">$</td> <td align="right">291.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">537.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.7</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(67.2</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">760.8</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash flows from investing activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Purchase of property and equipment </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(17.7</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(16.4</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(34.2</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">3.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">3.0</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">5.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by investing activities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(14.4</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(17.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2.9</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(29.0</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash flows from financing activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Treasury stock acquired </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(218.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(218.2</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Repayment of long-term debt </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(180.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(180.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Tax benefit relating to employee stock compensation </div></td> <td> </td> <td> </td> <td align="right">26.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">26.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net proceeds from employee stock plans </div></td> <td> </td> <td> </td> <td align="right">10.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">10.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net transactions with parent </div></td> <td> </td> <td> </td> <td align="right">412.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(489.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">9.8</td> <td> </td> <td> </td> <td> </td> <td align="right">67.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) financing activities </div></td> <td> </td> <td> </td> <td align="right">51.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(489.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">9.8</td> <td> </td> <td> </td> <td> </td> <td align="right">67.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(360.8</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Effect of foreign currency translation adjustment </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents </div></td> <td> </td> <td> </td> <td align="right">328.3</td> <td> </td> <td> </td> <td> </td> <td align="right">30.7</td> <td> </td> <td> </td> <td> </td> <td align="right">13.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">372.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period </div></td> <td> </td> <td> </td> <td align="right">1,005.0</td> <td> </td> <td> </td> <td> </td> <td align="right">10.0</td> <td> </td> <td> </td> <td> </td> <td align="right">55.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1,070.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of period </div></td> <td> </td> <td align="right">$</td> <td align="right">1,333.3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">40.7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">69.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,443.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Condensed Consolidating Statement of Cash Flows</b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Express</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Non-</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Scripts, Inc.</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Guarantors</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Guarantors</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Eliminations</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>Consolidated</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>For the three months ended</b> <b>March 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash flows provided by (used in) operating activities </div></td> <td> </td> <td align="right">$</td> <td align="right">221.2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">116.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">0.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(52.1</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">286.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash flows from investing activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Purchase of property and equipment </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(12.1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(13.6</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">3.2</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">3.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash used in investing activities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(8.9</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(10.4</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash flows from financing activities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Repayment of long-term debt </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(80.0</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(80.0</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Tax benefit relating to employee stock compensation </div></td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net proceeds from employee stock plans </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.4</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1.4</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net transactions with parent </div></td> <td> </td> <td> </td> <td align="right">50.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(104.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1.3</td> <td> </td> <td> </td> <td> </td> <td align="right">52.1</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by financing activities </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(30.3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(104.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1.3</td> <td> </td> <td> </td> <td> </td> <td align="right">52.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(81.1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Effect of foreign currency translation adjustment </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(0.5</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="top"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents </div></td> <td> </td> <td> </td> <td align="right">182.0</td> <td> </td> <td> </td> <td> </td> <td align="right">11.9</td> <td> </td> <td> </td> <td> </td> <td align="right">0.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">194.3</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period </div></td> <td> </td> <td> </td> <td align="right">488.1</td> <td> </td> <td> </td> <td> </td> <td align="right">8.9</td> <td> </td> <td> </td> <td> </td> <td align="right">33.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">530.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of period </div></td> <td> </td> <td align="right">$</td> <td align="right">670.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">20.8</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">34.1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">725.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div> </div>

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Includes retail pharmacy co-payments of $1,662.6 million and $822.7 million for the three months ended March 31, 2010 and 2009, respectively. 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EX-101.PRE 11 esrx-20100331_pre.xml EX-101 PRESENTATION LINKBASE DOCUMENT EX-101.DEF 12 esrx-20100331_def.xml EX-101 DEFINITION LINKBASE DOCUMENT XML 13 R11.xml IDEA: Goodwill and Other intangibles 2.0.0.10 false Goodwill and Other intangibles 0204 - Disclosure - Goodwill and Other intangibles true false false false 1 usd $ false false Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 2 Goodwill and Other intangibles [Abstract] 0 esrx_GoodwillAndOtherIntangiblesAbstract esrx false na duration string Goodwill and Other Intangibles abstract. false false false false false true false false false false false false 1 false false false false 0 0 false false false Goodwill and Other Intangibles abstract. false 3 Goodwill and Other intangibles 1 us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 4 – Goodwill and other intangible assets </b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following is a summary of our goodwill and other intangible assets (amounts in millions) for our two reportable segments PBM and Emerging Markets (“EM”): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>March 31, 2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31, 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Gross</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Net</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Gross</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Net</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accumulated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accumulated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Carrying</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amortization</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amortization</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Amount</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">PBM </div></td> <td> </td> <td align="right">$</td> <td align="right">5,474.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,367.0</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,472.1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.3</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,364.8</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">EM </div></td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right">$</td> <td align="right">5,628.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,521.4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5,626.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(107.3</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">5,519.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">PBM </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Customer contracts </div></td> <td> </td> <td align="right">$</td> <td align="right">2,018.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(235.0</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,783.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,018.3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(197.8</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,820.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Other<sup style="font-size: 85%; vertical-align: text-top"> </sup> </div></td> <td> </td> <td> </td> <td align="right">27.9</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(12.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">15.7</td> <td> </td> <td> </td> <td> </td> <td align="right">27.9</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(10.9</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">17.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">2,046.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(247.2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,799.2</td> <td> </td> <td> </td> <td> </td> <td align="right">2,046.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(208.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,837.5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">EM </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Customer relationships </div></td> <td> </td> <td> </td> <td align="right">72.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(31.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">40.9</td> <td> </td> <td> </td> <td> </td> <td align="right">72.4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(29.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">42.7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">2.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">74.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(31.5</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">43.3</td> <td> </td> <td> </td> <td> </td> <td align="right">74.8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(29.7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">45.1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total other intangible assets </div></td> <td> </td> <td align="right">$</td> <td align="right">2,121.2</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(278.7</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,842.5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,121.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(238.4</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,882.6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The aggregate amount of amortization expense of other intangible assets for our continuing operations was $40.1 million and $9.3 million for the three months ended March 31, 2010 and 2009, respectively. In accordance with applicable accounting guidance, amortization for customer contracts related to the PBM agreement has been included as an offset to revenues in the amount of $28.5 million for the three months ended March 31, 2010. The future aggregate amount of amortization expense of other intangible assets for our continuing operations is expected to be approximately $159.7 million for 2010, $157.9 million for 2011, $157.1 million for 2012, $156.5 million for 2013, and $152.1 million for 2014. The weighted average amortization period of intangible assets subject to amortization is 15 years in total, and by major intangible class is 5 to 20 years for customer-related intangibles and 3 to 10 years for other intangible assets. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A summary of the change in the net carrying value of goodwill by business segment is shown in the following table: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff">PBM</td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff">EM</td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #ffffff">Total</td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2009 </div></td> <td> </td> <td> </td> <td align="right">5,364.8</td> <td> </td> <td> </td> <td> </td> <td align="right">154.4</td> <td> </td> <td> </td> <td> </td> <td align="right">5,519.2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Adjustment to purchase price allocation<sup style="font-size: 85%; vertical-align: text-top">(1)</sup> </div></td> <td> </td> <td> </td> <td align="right">1.5</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">1.5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign currency translation and other </div></td> <td> </td> <td> </td> <td align="right">0.7</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">0.7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2010 </div></td> <td> </td> <td align="left">$</td> <td align="right">5,367.0</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">154.4</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5,521.4</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>Represents adjustments to preliminary assignment of fair value to net assets acquired for NextRx.</td> </tr> </table> <div align="left" style="font-size: 10pt; margin-top: 6pt">     See Note 3 for further information on goodwill related to recent acquisitions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During the first quarter of 2010, we received notification of a client contract loss in one of our smaller EM lines of business. The client contract will remain in effect through December 31, 2010. As a result of this client loss, we reassessed carrying values of assets and liabilities in this business unit in the first quarter of 2010. We are currently assessing the strategic options for this business. Based on the assessment of these options, we have concluded that there was no goodwill impairment as of March 31, 2010. As circumstances change, we will continue to re-evaluate the fair value of the business' assets as compared to the carrying values and there still exists the possibility of an impairment charge in 2010. As of March 31, 2010, the total assets for this business were $39.8 million which includes goodwill and intangible assets of $23.8 million. During the annual impairment analysis in 2009, this reporting unit's fair value was in excess of its carrying value by approximately 100%. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During 2009, the valuations of two other reporting units in our EM segment yielded fair values which were less than 20% in excess of their carrying value and we concluded that no impairment existed since their fair value exceeded their carrying value. As of March 31, 2010, the total assets which include goodwill and the intangible assets of these two reporting units were approximately $370.0 million and $28.0 million, respectively. During the first quarter of 2010, there have been no events or circumstances relative to these reporting units that would require a re-evaluation of the fair value of the EM segment assets as compared to the carrying values. The fair value of both reporting units was determined using the income approach whereby estimated future discounted cash flows are used to develop fair value. </div> </div>    <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>Note 3 – Acquisition</b></u> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On December 1, 2009, we completed the purchase of 100% of the shares and equity interests of certain subsidiaries of WellPoint, Inc. (“WellPoint”) that provide pharmacy benefit management services (“NextRx” or the “NextRx PBM Business”), in exchange for total consideration of $4.675 billion paid in cash, which is subject to a purchase price adjustment for working capital. The purchase price adjustment for working capital was finalized in the second quarter of 2010 and did not have a material impact. The NextRx PBM Business is a national provider of PBM services, and we believe the acquisition will enhance our ability to achieve cost savings, innovations, and operational efficiencies which will benefit our customers and stockholders. The purchase price was primarily funded through a $2.5 billion underwritten public offering of senior notes completed on June 9, 2009 resulting in net proceeds of $2,478.3 million, and a public offering of 26.45 million shares of common stock completed June 10, 2009 resulting in net proceeds of $1,569.1 million. This acquisition is reported as part of our PBM segment. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The parties have agreed to make an election under Section 338(h)(10) of the Internal Revenue Code with respect to the transaction which results in the goodwill and other intangibles generated being tax deductible over 15 years. We estimate the value of such election to us to be between $800 million and $1.2 billion dependent upon the discount factor and tax rate assumed. Additionally, at the closing of the acquisition, we entered into a 10-year contract with WellPoint (the “PBM agreement”) under which we will provide pharmacy benefits management services to WellPoint and its designated affiliates which were previously provided by NextRx. The services provided under the PBM Agreement include retail network pharmacy management, home delivery and specialty pharmacy services, drug formulary management, claims adjudication and other services consistent with those provided to other PBM clients. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following unaudited pro forma information presents a summary of our combined results of operations and those of the NextRx PBM Business for the three months ended March 31, 2009 as if the acquisition and financing transactions had occurred at January 1, 2009, along with certain pro forma adjustments to give effect to amortization of other intangible assets, interest expense on acquisition debt and other adjustments. This information is presented with actual results from the three months ended March 31, 2010 for comparative purposes. The following pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the PBM business: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><b>March 31,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #ffffff"><b><i>(in millions, except per share data)</i></b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><b>2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total revenues </div></td> <td> </td> <td align="right">$</td> <td align="right">11,143.9</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9,372.4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net income from continuing operations </div></td> <td> </td> <td> </td> <td align="right">260.2</td> <td> </td> <td> </td> <td> </td> <td align="right">235.9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Basic earnings per share from continuing operations </div></td> <td> </td> <td> </td> <td align="right">0.95</td> <td> </td> <td> </td> <td> </td> <td align="right">0.86</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Diluted earnings per share from continuing operations </div></td> <td> </td> <td align="right">$</td> <td align="right">0.94</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">0.86</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The purchase price has been preliminarily allocated based upon the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition. Because information may become available within the measurement period (one year from the date of acquisition) which indicates a potential change to these valuations, the purchase price allocation is subject to change. The Company expects to finalize the allocation of the purchase price prior to or during the fourth quarter of 2010. The components of the preliminary purchase price allocation for NextRx are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><b>Allocation of Purchase Price (in millions):</b></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="left">$</td> <td align="right">937.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Property and equipment </div></td> <td> </td> <td> </td> <td align="right">42.7</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Acquired intangible assets </div></td> <td> </td> <td> </td> <td align="right">1,585.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">2,688.2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities assumed </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(577.9</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">4,675.0</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The values of the tangible net assets in the above table are representative of the fair values of those assets and liabilities. The current assets of $937.0 million are primarily comprised of pharmaceutical manufacturer rebate receivables, which have historically experienced better collection rates than other customer trade receivables. As a result, the allowance for doubtful accounts related to these receivables is lower than our book of business average. The liabilities assumed of $577.9 million are primarily comprised of rebates payable to clients. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     A portion of the excess of purchase price over tangible net assets acquired has been preliminarily allocated to intangible assets consisting of customer contracts in the amount of $1,585.0 million. These assets are included in other intangible assets on the unaudited consolidated balance sheet. The excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $2,688.2 million. The goodwill is the result of synergies derived from our ability to drive growth in generic and mail order utilization and supply chain savings from both drug manufacturers and the retail network. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>  <!-- Begin Block Tagged Note false false false Description of a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. This element may be used as a single block of text to encapsulate the entire disclosure (including data and tables) regarding business combinations, including leverage buyout transactions (as applicable). 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