-----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, Lh4L2nUyqlqjwdvkwIz9jDcftrIZrVar1jFncXc3YxwO3i8qsjyNeUDsJWNWlYoM bXandx1yuzYLwKCA002VmA== 0000885721-00-000007.txt : 20000211 0000885721-00-000007.hdr.sgml : 20000211 ACCESSION NUMBER: 0000885721-00-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 ITEM INFORMATION: FILED AS OF DATE: 20000210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPRESS SCRIPTS INC CENTRAL INDEX KEY: 0000885721 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 431420563 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20199 FILM NUMBER: 532128 BUSINESS ADDRESS: STREET 1: 13900 REIVERPORT DRIVE CITY: MARYLAND HEIGHTS STATE: MO ZIP: 63043 BUSINESS PHONE: 3147701666 MAIL ADDRESS: STREET 1: 14000 REIVERPORT DRIVE CITY: MARYLAND HEIGHTS STATE: MO ZIP: 63043 8-K 1 PRESS RELEASE - 4TH QUARTER FINANCIALS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report: February 9, 2000 Express Scripts, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as specified in its Charter) Delaware 0-20199 43-1420563 - -------------------------------------------------------------------------------- (State or other (Commission File No.) (I.R.S. Employer jurisdiction of Identification No.) corporation) 13900 Riverport Drive, Maryland Heights, Missouri 63043 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (314) 770-1666 ----------------------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events On February 9, 2000, Express Scripts, Inc. issued a press release, a copy of which is attached hereto as Exhibit 99.1, and incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) The following exhibit is filed as part of this report on Form 8-K: Exhibit 99.1 Press release, dated February 9, 2000, by Express Scripts, Inc. SIGNATURE 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 hereunto duly authorized. EXPRESS SCRIPTS, INC. Date: February 10, 2000 By: /s/ Barrett A. Toan Barrett A. Toan President and Chief Executive Officer EXHIBIT INDEX Exhibit No. Description 99.1 Press release, dated February 9, 2000, by Express Scripts, Inc. EX-99.1 2 PRESS RELEASE - 4TH QUARTER FINANCIALS EXPRESS SCRIPTS ANNOUNCES 65% INCREASE IN FOURTH QUARTER PRO FORMA NET INCOME ST. LOUIS, February 9, 2000--Express Scripts, Inc. (NASD: ESRX) announced pro forma fourth quarter 1999 net income of $19.6 million, or 50 cents per diluted share, and year-to-date 1999 pro forma net income of $67.3 million, or $1.77 per diluted share. This compares with net income of $11.9 million, or 35 cents per diluted share, in the fourth quarter of 1998 and pro forma net income of $43.7 million, or $1.30 per diluted share, in the year ended December 31, 1998. Pro forma net income in 1999 and 1998 excludes one-time, non-recurring or extraordinary gains and charges. Pro forma net income in 1999 also assumes that the Company's equity and debt offering occurred on April 1, 1999. Net income on a reported basis was $119.3 million, or $3.03 per diluted share, for the fourth quarter of 1999 and $150.2 million, or $4.06 per diluted share, for the year, and includes a $182.9 million one-time pre-tax gain related to the PlanetRx.com, Inc. (PlanetRx) transaction, compared to $42.7 million, or $1.27 per diluted share, for 1998. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter 1999 on a pro forma basis totaled $69.7 million, a 98 percent increase over the $35.2 million reported in the same quarter of 1998. "We are very pleased with our fourth quarter and 1999 results, which are our best ever. We are also very confident that recent events have put us in an excellent position for continued strong financial performance. We are beginning the new millennium having added a million new members, expanded services to approximately 4.5 million existing membership, increased mail pharmacy volumes significantly, and initiated work under an innovative distribution contract with Bayer through our Specialty Distribution Services division," said Barrett Toan, president and chief executive officer. "In 2000, we believe our historical pro forma net income growth rate can be sustained due to the underlying trends and opportunities inherent in the business, including the addition of new members, increased utilization, inflation and drug mix changes, cross-selling of services to existing clients, expansion of other business lines such as specialty distribution and reductions in interest expense," Toan said. STRONG OPERATING RESULTS In the fourth quarter of 1999, net revenues were $1.3 billion, a 56 percent increase over $838.8 million in the same period of 1998. Gross profit increased 81 percent to $134.5 million in the fourth quarter of 1999 from $74.4 million for the comparable period of 1998. The increase in gross profit better reflects the impact of the DPS acquisition since DPS recognizes revenues and cost of revenue on a net basis. This means that the ingredient cost of the drug is not included in revenues or cost of revenues. Selling, general and administrative expenses (SG&A), excluding depreciation and amortization, were $67.4 million, a 63 percent increase over the $41.4 million reported for the comparable period of 1998. The increase in SG&A expense is primarily due to the acquisition of DPS, which was completed on April 1, 1999, planned integration costs, costs associated with the Company's execution of its Internet strategy, the rollout of the Company's new branding program and new product development. The strong fourth quarter results are due to higher utilization by members in both the network and mail services, a portion of which may have been attributable to year-end buying motivated by members' concerns over potential Y2K problems. On October 13, 1999, the Company acquired a 19.9% ownership stake in PlanetRx in a noncash transaction, and PlanetRx assumed stock options granted to certain yourPharmacy.com employees. In connection with this transaction, the Company recorded a pre-tax gain of $182.9 million and pre-tax stock compensation expense of $19.5 million. These amounts were determined using the $16 per share PlanetRx initial offering price. During the fourth quarter of 1999, the Company recorded $3.8 million of fees from PlanetRx. These fees were used to fund our internet strategy. In addition, in the fourth quarter of 1999 the Company recorded net non-recurring charges of $1.3 million related to outsourcing the Company's computer operations to EDS and restructuring the operations of its Practice Patterns Science subsidiary. These charges were partially offset by the reversal of a portion of the restructuring charge taken in the second quarter of 1999 related to the consolidation of the Company's two Minneapolis facilities. For the year ended December 31, 1999, net revenues increased 52 percent to $4.3 billion, which includes net revenues of DPS since April 1, 1999. Gross profit increased to $461.2 million from $239.9 million for the year ended December 31, 1999, or 92 percent. SG&A expenses, excluding depreciation and amortization, were $231.5 million, a 78 percent increase over the $130.1 million reported for 1998. EBITDA, on a pro forma basis, increased 104 percent from $117.3 million in the year ended December 31, 1998 to $238.9 million in the year ended December 31, 1999. CLAIMS AND MEMBERS As of January 1, 2000, Express Scripts served 38.5 million members, up from 37.5 million members in the third quarter, excluding about 9.5 million members served under the United Healthcare (UHC) contract. The Company is implementing a transition program leading to the UHC contract expiration in May 2000. New members added during the first quarter 2000 will be larger than usual because a number of new groups will be implemented in the first quarter due to certain clients postponing implementations until after January 1, due to Y2K concerns. "The service expansion to 4.5 million additional members testifies to the success of our integration efforts following the April 1999 acquisition of DPS," said Toan. The service expansion includes programs that provide for more advanced formulary management. Also included is the addition of mail or network service where only one or the other had been used previously. The Specialty Distribution Services division contract with Bayer involves the development and implementation of an innovative distribution system for Prolastin(R), for which demand is greater than supply. Working closely with patient support groups to ensure fairness in distribution, Express Scripts fulfills the role of the sole service, distribution and reimbursement agent for Bayer. CASH FLOW For the year ended, cash flow from operations was $214.1 million. Due to new banking relationships, the Company recorded a one-time increase in the cash balance of $113.7 million. On a comparable basis, assuming the one-time increase in cash occurred in the third quarter of 1999, cash flow from operations for the fourth quarter of 1999 was $33.9 million. The fourth quarter cash flow from operations was reduced by an increase of approximately $30 million in the inventory balance which the Company made to address potential higher year-end demand in its mail pharmacies due to members' Y2K concerns. The Company expects to reduce the inventory balances during the first half of 2000. As a result of strong operating cash flows, the Company reduced the outstanding balance of its revolving credit agreement using $40 million of cash in the fourth quarter of 1999 and $30 million of cash in January 2000. The Company expects continued positive cash flow and no material effect on earnings during transition of the approximately 9.5 million members of UHC to another pharmacy benefit management company during 2000. Express Scripts has negotiated an orderly, phased transition to begin in June and continue for the balance of 2000. This will allow for both uninterrupted services for UHC members and a reduction in the impact on cash flow from operations for Express Scripts. Due to the timing of cash receipts and payments under the UHC contract, cash flow from operations will be reduced temporarily by an estimated $20 million during the third quarter and will return to normal levels during the fourth quarter of 2000. As announced at the time of the DPS acquisition, a portion of the purchase price of DPS was allocated to the UHC contract and has been amortized during the life of the UHC contract. Express Scripts, Inc. is the nation's leading independent full-service pharmacy benefit management (PBM) company. Through facilities in seven states and Canada, the Company serves thousands of clients throughout North America, including managed care organizations, insurance carriers, third-party administrators, employers and union-sponsored benefit plans. Express Scripts provides fully-integrated PBM services, including network claims processing, mail-order pharmacy services, benefit design consultation, drug utilization review, formulary management, disease management, medical and drug data analysis services, medical information management services (which include provider profiling and outcome assessments through the Practice Patterns Science, Inc. subsidiary), and informed decision counseling services through its Express Health Line SM division. The company also provides non-PBM services, including infusion therapy services through its IVTx subsidiary and distribution services through its Specialty Distribution division. Express Scripts is headquartered in St. Louis, Missouri. More information can be found at http://www.express-scripts.com, which includes expanded investor information and resources. SAFE HARBOR STATEMENT This press release contains forward-looking statements, including, but not limited to, statements related to the Company's plans, objectives, expectations (financial and otherwise) or intentions. Actual results may differ significantly from those projected or suggested in any forward-looking statements. Factors that may impact these forward-looking statements include but are not limited to: (i) risks associated with successfully completing its Internet strategy; (ii) risks associated with the consummation and financing of acquisitions, including the ability to successfully integrate the operations of acquired businesses with our existing operations, client retention issues, and risks inherent in the acquired entities operations; (iii) risks associated with obtaining financing and capital; (iv) risks associated with our ability to manage growth; (v) competition, including price competition, competition in the bidding and proposal process and our ability to consummate contract negotiations with prospective clients; (vi) the possible termination of contracts with certain key clients or providers; (vii) the possible termination of contracts with certain pharmaceutical manufacturers, changes in pricing, discount, rebate or other practices of pharmaceutical manufacturers; (viii) adverse results in litigation; (ix) adverse results in regulatory matters, the adoption of adverse legislation or regulations, more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations; (x) developments in the healthcare industry, including the impact of increases in healthcare costs, changes in drug utilization patterns and introductions of new drugs; (xi) dependence on key members of management; (xii) our relationship with New York Life Insurance Company, which possesses voting control of the Company; (xiii) other risks described from time to time in our filings with the Securities and Exchange Commission. The Company does not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. FINANCIAL TABLES FOLLOW Express Scripts Reports Fourth Quarter Earnings
EXPRESS SCRIPTS, INC. Unaudited Statement of Operations (in thousands, except per share and percentage data) Three Months Ended December 31 Pro Forma to Actual Pro Forma Actual Actual 1999 1999 (1) 1998 % Change % Change ------------ ---------- ---------- --------- -------- Net revenues $1,308,772 $1,308,772 $838,784 56.0% 56.0% ------------ ---------- --------- Cost and expenses: Cost of revenues (2) 1,174,282 1,174,282 764,403 53.6% 53.6% Selling, general and administrative (3) 87,096 87,096 47,745 82.4% 82.4% Non-recurring charges 20,821 - - nm nm ----------- ----------- ---------- 1,282,199 1,261,378 812,148 57.9% 55.3% ----------- ----------- ---------- Operating income 26,573 47,394 26,636 (0.2%) 77.9% ----------- ----------- ---------- Other income (expense): Gain on sale of assets 182,930 - - nm nm Interest income 1,861 1,861 1,553 19.8% 19.8% Interest expense (14,764) (14,764) (6,437) 129.4% 129.4% ------------- ---------- ---------- 170,027 (12,903) (4,884) 3,581.3% 164.2% ------------- ---------- ---------- Income before income taxes 196,600 34,491 21,752 803.8% 58.6% Provision for income taxes 77,341 14,856 9,828 686.9% 51.2% ------------- ---------- ---------- Net income $119,259 $19,635 $11,924 900.2% 64.7% ============= ========== ========== Basic earnings per share $3.10 $0.51 $0.36 761.1% 41.7% ============= ========== ========== Weighted average number of common shares outstanding during the period - basic 38,532 38,532 33,145 16.3% 16.3% ============= ========== ========== Diluted earnings per share $3.03 $0.50 $0.35 765.7% 42.9% ============= ========== ========== Weighted average number of common shares outstanding during the period - diluted 39,403 39,403 33,887 16.3% 16.3% ============= ========== ========== EBITDA (4) $48,925 $69,746 $35,237 38.8% 97.9% ============= ========== ========== nm - not meaningful (1) Pro Forma excludes non-recurring charges and gain on sale of assets. (2) Includes depreciation and amortization expense of $2,675, $2,675 and $2,238, respectively. (3) Includes depreciation and amortization expense of $19,677, $19,677 and $6,363, respectively. (4) EBITDA is earnings before interest, taxes, depreciation and amortization (operating income plus depreciation and amortization). EBITDA is presented because it is a widely accepted indicator of a Company's ability to incur and service indebtedness. EBITDA, however, should not be considered as an alternative to net income as a measure of operating performance or an alternative to cash flow as a measure of liquidity. In addition, our definition of EBITDA may not be comparable to that reported by other companies.
EXPRESS SCRIPTS, INC. Unaudited Statement of Operations (in thousands, except per share and percentage data) Year Ended December 31 Pro Forma to Actual Pro Forma Actual Actual 1999 1999 (1) 1998 % Change % Change ---------- ----------- ---------- --------- -------- Net revenues $4,288,104 $4,288,104 $2,824,872 51.8% 51.8% ---------- ----------- ---------- Cost and expenses: Cost of revenues (2) 3,826,905 3,826,905 2,584,997 48.0% 48.0% Selling, general and administrative (3) 294,194 294,194 148,990 97.4% 97.4% Non-recurring charges 30,221 - 1,651 1,730.5% nm ---------- ----------- ---------- 4,151,320 4,121,099 2,735,638 51.7% 50.6% ---------- ----------- ---------- Operating income 136,784 167,005 89,234 53.3% 87.2% ---------- ----------- ---------- Other income (expense): Gain on sale of assets 182,930 - - nm nm Interest income 5,762 5,762 7,236 (20.4%) (20.4%) Interest expense (60,010) (53,849) (20,230) 196.6% 166.2% ---------- ----------- ----------- 128,682 (48,087) (12,994) 1,090.3% 270.1% ---------- ----------- ----------- Income before income taxes 265,466 118,918 76,240 248.2% 56.0% Provision for income taxes 108,098 51,592 33,566 222.0% 53.7% ---------- ----------- ----------- Income before extraordinary item 157,368 67,326 42,674 268.8% 57.8% Extraordinary loss on early retirement of debt, net of taxes of $4,492 7,150 - - nm - ----------- ----------- ----------- Net income $150,218 $67,326 $42,674 252.0% 57.8% =========== =========== =========== Basic earnings per share: Before extraordinary item $4.36 $1.81 $1.29 238.0% 40.3% Extraordinary loss on early retirement of debt 0.20 - - nm - ----------- ----------- ------------ Net income $4.16 $1.81 $1.29 222.5% 40.3% =========== =========== ============ Weighted average number of common shares outstanding during the period - basic 36,095 37,187 33,105 9.0% 12.3% =========== ============ ============ Diluted earnings per share: Before extraordinary item $4.25 $1.77 $1.27 234.6% 39.4% Extraordinary loss on early retirement of debt 0.19 - - nm - ----------- ------------ ------------ Net income $4.06 $1.77 $1.27 219.7% 39.4% =========== ============ ============ Weighted average number of common shares outstanding during the period - diluted 37,033 38,125 33,698 9.9% 13.1% ============ ============ =========== EBITDA (4) $208,651 $238,872 $115,683 80.4% 106.5% ============ ============ =========== nm - not meaningful (1) Pro Forma excludes non-recurring charges, gain on sale of assets and the extraordinary loss on early retirement of debt. Also, the Pro Forma assumes the Company's 5,175 common stock offering and $250,000 Senior Notes offering occurred on April 1, 1999. (2) Includes depreciation and amortization expense of $9,216, $9,216 and $7,575, respectively. (3) Includes depreciation and amortization expense of $62,651, $62,651 and $18,874, respectively. (4) EBITDA is earnings before interest, taxes, depreciation and amortization (operating income plus depreciation and amortization). EBITDA is presented because it is a widely accepted indicator of a Company's ability to incur and service indebtedness. EBITDA, however, should not be considered as an alternative to net income as a measure of operating performance or an alternative to cash flow as a measure of liquidity. In addition, our definition of EBITDA may not be comparable to that reported by other companies.
EXPRESS SCRIPTS, INC. Unaudited Balance Sheet (in thousands) December 31, December 31, 1999 1998 -------------- --------------- ASSETS Current assets Cash and cash equivalents $132,630 $122,589 Receivables, net 783,086 433,006 Inventories 113,248 55,634 Deferred taxes 32,248 41,011 Prepaid expenses 5,143 4,667 ------------ ------------- Total current assets 1,066,355 656,907 Property and equipment, net 97,573 77,499 Investment in PlanetRx 150,365 Goodwill, net 982,496 282,163 Other intangible assets, net 183,420 65,765 Other assets 7,102 13,127 ------------ ------------- Total assets $2,487,311 $1,095,461 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ - $54,000 Claims and rebate payable 850,630 338,251 Accounts payable 112,731 60,247 Accrued expenses 136,997 86,798 ------------ ------------ Total current liabilities 1,100,358 539,296 Long-term debt 635,873 306,000 Other long-term liabilities 51,598 471 ------------ ------------ Total liabilities 1,787,829 845,767 Total stockholders' equity 699,482 249,694 ------------ ------------ Total liabilities and stockholders' equity $2,487,311 $1,095,461 ============ ============
EXPRESS SCRIPTS, INC. Unaudited Non-Financial Data (in thousands, except percentage data) Three Months Ended December 31 ---------------------------------------- 1999 (1) 1998 % Change ------------------- ------------------- ---------- Drug spending $2,663,853 $1,357,824 96.2% Pharmacy network claims processed 63,759 32,951 93.5% Mail pharmacy prescriptions filled 3,180 2,159 47.3%
Year Ended December 31 --------------------------------------- 1999 (1) 1998 % Change ---------------- ---------------- ---------- Drug spending $8,738,648 $4,495,088 94.4% Pharmacy network claims processed 211,808 113,177 87.1% Mail pharmacy prescriptions filled 10,608 7,426 42.8%
Selected Ratio Analysis Actual Pro Forma Net debt to EBITDA ratio (2) (7) 2.2x 1.9x Interest coverage ratio (2) (4) (7) 3.2x 4.2x Debt to enterprise value (3) 20.5% 20.5% Net debt to net capitalization (3) 41.8% 41.8% Cash value per share (5) $3.44 $3.44 Book value per share (6) $18.15 $18.15 (1) Drug spending and pharmacy network claims processed excludes UHC. For the three months and year ended December 31, 1999, drug spending and pharmacy network claims processed for UHC were $866,004 and $2,421,741, respectively, and 21,546 and 62,101, respectively. (2) Annualized using financial information for the nine months ended December 31, 1999. (3) Based on financial information as of December 31, 1999. (4) Represent EBITDA divided by interest expense. (5) Represents cash divided by 38,536 shares outstanding at December 31, 1999 (6) Represents stockholders' equity divided by 38,536 shares outstanding at December 31, 1999. (7) Pro Forma excludes non-recurring charges, the gain on the sale of assets and the extraordinary loss on early retirement of debt. Also, the Pro Forma assumes the Company's 5,175 common stock offering and $250,000 Senior Notes offering occurred on April 1, 1999.
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