-----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, RKJGwoPj2qbSylOKHcMVMTidc+t5oD1I7liEN5bK2iJVbMiV7M4IJdH4YXbT/7s5 vVbb+J7uxKsfnl98h9I0yQ== /in/edgar/work/0000885721-00-000042/0000885721-00-000042.txt : 20001114 0000885721-00-000042.hdr.sgml : 20001114 ACCESSION NUMBER: 0000885721-00-000042 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPRESS SCRIPTS INC CENTRAL INDEX KEY: 0000885721 STANDARD INDUSTRIAL CLASSIFICATION: [8093 ] IRS NUMBER: 431420563 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20199 FILM NUMBER: 759570 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 10-Q 1 0001.txt 3ND QUARTER 2000 FINANCIALS EXPRESS SCRIPTS, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000. 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 of Incorporation) (I.R.S. employer identification no.) 13900 Riverport Dr., Maryland Heights, Missouri 63043 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (314) 770-1666 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 X No ___ Common stock outstanding as of November 9, 2000: 38,596,891 Shares Class A EXPRESS SCRIPTS, INC. INDEX Page Number Part I Financial Information 3 Item 1. Financial Statements (unaudited) a) Consolidated Balance Sheet 3 b) Consolidated Statement of Operations 4 c) Consolidated Statement of Changes in Stockholders' Equity 5 d) Consolidated Statement of Cash Flows 6 e) Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Quantitative and Qualitative Disclosures About Market Risks 23 Part II Other Information Item 1. Legal Proceedings - (Not Applicable) Item 2. Changes in Securities and Use of Proceeds - (Not Applicable) Item 3. Defaults Upon Senior Securities - (Not Applicable) Item 4. Submission of Matters to a Vote of Security Holders - (Not Applicable) Item 5. Other Information - (Not Applicable) Item 6. Exhibits and Reports on Form 8-K 24 Signatures 25 Index to Exhibits 26 PART I. FINANCIAL INFORMATION Item 1. Financial Statements EXPRESS SCRIPTS, INC. Unaudited Consolidated Balance Sheet
September 30, December 31, (in thousands, except share data) 2000 1999 ----------------- ---------------- Assets Current assets: Cash and cash equivalents $ 22,182 $ 132,630 Receivables, net 768,110 783,086 Inventories 71,141 113,248 Other current assets 26,227 37,391 ----------------- ---------------- Total current assets 887,660 1,066,355 Investment in marketable securities 4,493 150,365 Property and equipment, net 122,494 97,573 Goodwill, net 975,855 982,496 Other intangible assets, net 159,314 183,420 Other assets 6,912 7,102 ----------------- ---------------- Total assets $ 2,156,728 $ 2,487,311 ================= ================ Liabilities and Stockholders' Equity Current liabilities: Claims and rebates payable $ 798,087 $ 850,630 Other current liabilities 224,397 249,728 ----------------- ---------------- Total current liabilities 1,022,484 1,100,358 Long-term debt 426,523 635,873 Other liabilities 39,544 51,598 ----------------- ---------------- Total liabilities 1,488,551 1,787,829 ----------------- ---------------- Stockholders' equity: Preferred stock, $0.01 par value, 5,000,000 shares authorized, and no shares issued and outstanding Class A Common Stock, $0.01 par value, 150,000,000 shares authorized, 24,246,000 and 23,981,000 shares issued and outstanding, respectively 242 240 Class B Common Stock, $0.01 par value, 31,000,000 shares authorized, 15,020,000 shares issued and outstanding 150 150 Additional paid-in capital 446,626 418,921 Unearned compensation under employee compensation plans (14,566) - Accumulated other comprehensive income (3,723) (9,521) Retained earnings 267,670 296,540 ----------------- ---------------- 696,399 706,330 Class A Common Stock in treasury at cost, 744,000 and 465,000 shares, respectively (28,222) (6,848) ----------------- ---------------- Total stockholders' equity 668,177 699,482 ----------------- ---------------- Total liabilities and stockholders' equity $ 2,156,728 $ 2,487,311 ================= ================
See accompanying Notes to Consolidated Financial Statements EXPRESS SCRIPTS, INC. Unaudited Consolidated Statement of Operations
Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except per share data) 2000 1999 2000 1999 --------------- ---------------- ---------------- ---------------- Revenues: Revenues $ 1,732,151 $ 1,083,496 $ 4,854,942 $ 2,979,332 Other revenues 4,338 - 10,423 - --------------- ---------------- ---------------- ---------------- 1,736,489 1,083,496 4,865,365 2,979,332 --------------- ---------------- ---------------- ---------------- Cost and expenses: Cost of revenues 1,603,650 958,987 4,462,677 2,652,623 Selling, general and administrative 82,687 78,761 253,479 207,098 Non-recurring - - - 9,400 --------------- ---------------- ---------------- ---------------- 1,686,337 1,037,748 4,716,156 2,869,121 --------------- ---------------- ---------------- ---------------- Operating income 50,152 45,748 149,209 110,211 --------------- ---------------- ---------------- ---------------- Other income (expense): Write-down of marketable securities - - (155,500) - Interest income 2,774 1,065 6,201 3,902 Interest expense (10,861) (15,794) (38,245) (45,247) --------------- ---------------- ---------------- ---------------- (8,087) (14,729) (187,544) (41,345) --------------- ---------------- ---------------- ---------------- Income (loss) before income taxes 42,065 31,019 (38,335) 68,866 Provision for (benefit from) income taxes 17,292 13,471 (10,363) 30,757 --------------- ---------------- ---------------- ---------------- Income (loss) before extraordinary item 24,773 17,548 (27,972) 38,109 Extraordinary item, net of taxes (898) (553) (898) (7,150) --------------- ---------------- ---------------- ---------------- Net income (loss) $ 23,875 $ 16,995 $ (28,870) $ 30,959 =============== ================ ================ ================ Basic earnings (loss) per share: Before extraordinary item $ 0.64 $ 0.46 $ (0.74) $ 1.08 Extraordinary item (0.02) (0.02) (0.02) (0.20) --------------- ---------------- ---------------- ---------------- Net income (loss) $ 0.62 $ 0.44 $ (0.76) $ 0.88 =============== ================ ================ ================ Weighted average number of common shares outstanding during the period - Basic EPS 38,331 38,480 38,163 35,274 =============== ================ ================ ================ Diluted earnings (loss) per share Before extraordinary item $ 0.63 $ 0.45 $ (0.72) $ 1.06 Extraordinary item (0.02) (0.02) (0.02) (0.20) --------------- ---------------- ---------------- ---------------- Net income (loss) $ 0.61 $ 0.43 $ (0.74) $ 0.86 =============== ================ ================ ================ Weighted average number of common shares outstanding during the period - Diluted EPS 39,290 39,354 38,920 36,148 =============== ================ ================ ================
See accompanying Notes to Consolidated Financial Statements EXPRESS SCRIPTS, INC. Unaudited Consolidated Statement of Changes in Stockholders' Equity
Number of Shares Amount --------------- ---------------------------------------------------------------------------------- Unearned Compensation Under Accumulated Class A Class B Class A Class B Additional Employee Other Common Common Common Common Paid-in Compensation Comprehensive Retained Treasury (in thousands) Stock Stock Stock Stock Capital Plans Income Earnings Stock Total - --------------------------------------------- ------------------------------------------------------------------------------------ Balance at December 31, 1999 23,981 15,020 $ 240 $ 150 $418,921 $ - $ (9,521) $296,540 $(6,848) $699,482 ---------------- ------------------------------------------------------------------------------------ Comprehensive income: Net loss - - - - - - - (28,870) - (28,870) Other comprehensive income, Foreign currency translation adjustment - - - - - - (152) - - (152) Unrealized loss on investment, net of tax benefit of $2,172 - - - - - - (3,605) - - (3,605) Recognition of prior period unrealized losses on investments - - - - - - 9,555 - - 9,555 ---------------- ------------------------------------------------------------------------------------ Comprehensive income (loss) - - - - - - 5,798 (28,870) - (23,072) Repurchase of Class A Common Stock - - - - - - - (30,247) (30,247) Common stock issued under employee plans 265 - 2 - 16,803 (15,128) - - - 1,677 Amortization of unearned compensation under employee plans - - - - - 562 - - - 562 Exercise of stock options - - - - 1,171 - - - 8,873 10,044 Tax benefit relating to employee stock options - - - - 9,731 - - - - 9,731 ----------------- ------------------------------------------------------------------------------------ Balance at September 30, 2000 24,246 15,020 $ 242 $ 150 $446,626 $(14,566) $ (3,723) $267,670 $(28,222) $668,177 ================= ====================================================================================
See accompanying Notes to Consolidated Financial Statements EXPRESS SCRIPTS, INC. Unaudited Consolidated Statement of Cash Flows
Nine Months Ended September 30, (in thousands) 2000 1999 ---------------- ---------------- Net (loss) income $ (28,870) $ 30,959 Adjustment to reconcile net (loss) income to net cash provided by operating activities Depreciation and amortization 61,356 50,756 Deferred income taxes (45,657) 9,494 Bad debt expense 9,405 3,005 Tax benefit relating to employee stock options 9,731 2,689 Write-down of marketable securities 155,500 - Non-recurring charges, net of cash - 5,762 Extraordinary item 1,454 11,642 Net changes in operating assets and liabilities, net of changes resulting from acquisition (5,750) (25,690) ---------------- ---------------- Net cash provided by operating activities 157,169 88,617 ---------------- ---------------- Cash flows from investing activities: Purchases of property and equipment (46,976) (25,924) Proceeds from sale of property and equipment 8,831 - Acquisition, net of cash acquired - (718,416) Other, net (966) - ---------------- ---------------- Net cash (used in) investing activities (39,111) (744,340) ---------------- ---------------- Cash flows from financing activities: Repayment of long-term debt (210,069) (975,000) Proceeds from long-term debt - 1,288,815 Repurchase of Class A Common Stock (30,247) - Net proceeds from issuance of common stock - 299,381 Financing fees paid - (25,437) Other, net 11,963 5,781 ---------------- ---------------- Net cash (used in) provided by financing activities (228,353) 593,540 ---------------- ---------------- Effects of foreign currency translation adjustment (153) 48 ---------------- ---------------- Net decrease in cash and cash equivalents (110,448) (62,135) Cash and cash equivalents at beginning of period 132,630 122,589 ---------------- ---------------- Cash and cash equivalents at end of period $ 22,182 $ 60,454 ================ ================
See accompanying Notes to Consolidated Financial Statements EXPRESS SCRIPTS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Financial statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in our opinion, 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 consolidated financial statements included in our Annual Report on Form 10-K for the Year Ended December 31, 1999, as filed with the Securities and Exchange Commission on March 29, 2000. In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Unaudited Consolidated Balance Sheet at September 30, 2000, the Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2000, and 1999, the Unaudited Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2000, and the Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2000, and 1999. Operating results for the three months and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. Note 2 - Receivables As of September 30, 2000 and December 31, 1999, unbilled receivables were $387,561,000 and $416,740,000, respectively. Unbilled receivables are billed to clients typically within 30 days based on the contractual billing schedule agreed upon with the client. As of September 30, 2000 and December 31, 1999, we have allowances for doubtful accounts of $22,035,000 and $17,281,000, respectively. Note 3 - Earnings Per Share Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share 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 difference between the number of weighted average shares used in the basic and diluted calculation for all periods are outstanding stock options and stock warrants (959,000 and 757,000 shares for the three and nine months ended of September 30, 2000) and any unvested shares and shares issuable pursuant to employee elected deferral under the executive deferred compensation plan (there were no shares for the three and nine months ended of September 30, 2000), all calculated under the "treasury stock" method in accordance with Financial Accounting Standards Board Statement No. 128, "Earnings Per Share". Note 4 - Acquisition The shareholders of Centre d'autorisation et de paiement des services de sante, a leading Quebec-based PBM commonly referred to as CAPSS, accepted the offer made by our Canadian subsidiary, ESI Canada, Inc., to acquire all of the outstanding shares of CAPSS, subject to regulatory approval and satisfaction of certain conditions, for approximately CDN$25 million (approximately US$16.5 million). The transaction, which is expected to close by year-end, will add approximately 1.5 million lives to ESI Canada's membership base. The transaction is not expected to be dilutive to earnings in 2001 and is expected to be slightly accretive in 2002. On April 1, 1999, we completed our acquisition of Diversified Pharmaceutical Services, Inc. and Diversified Pharmaceutical Services (Puerto Rico) Inc. (collectively, "DPS"), from SmithKline Beecham Corporation and SmithKline Beecham InterCredit BV (collectively, "SB") for approximately $715 million, which includes a purchase price adjustment for closing working capital and transaction costs. We filed an Internal Revenue Code ss.338(h)(10) election, making amortization expense of intangible assets, including goodwill, tax deductible. We used approximately $48 million of our own cash and financed the remainder of the purchase price and related acquisition costs. The acquisition has been accounted for using the purchase method of accounting. The results of operations of DPS have been included in the consolidated financial statements and pharmacy benefit management ("PBM") segment since April 1, 1999. The purchase price has been allocated based on the estimated fair values of net assets acquired at the date of the acquisition. The excess of purchase price over tangible net assets acquired has been allocated to other intangible assets consisting of customer contracts in the amount of $129,500,000 which are being amortized using the straight-line method over the estimated useful lives of 1 to 20 years and goodwill in the amount of $754,236,000 which is being amortized using the straight-line method over the estimated useful life of 30 years. In conjunction with the acquisition, DPS retained the following liabilities: (in thousands) - --------------------------------------------------------------------- Fair value of assets acquired $ 1,028,848 Cash paid for the capital stock (714,678) ----------------------- Liabilities retained $ 314,170 ======================= The following unaudited pro forma information presents a summary of our combined results of operations and those of DPS as if the acquisition had occurred at the beginning of the period presented, along with certain pro forma adjustments to give effect to amortization of goodwill, other intangible assets, interest expense on acquisition debt and other adjustments. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date, nor is it an indication of trends in future results. Nine Months Ended September 30, (in thousands, except per share data) 1999 - -------------------------------------------------------------------------- Total revenues $ 3,044,698 Income before extraordinary item 39,164 Extraordinary item (7,150) ---------------------- Net income $ 32,014 ====================== Basic earnings per share Before extraordinary item $ 1.11 Extraordinary item (0.20) ---------------------- Net income $ 0.91 ====================== Diluted earnings per share Before extraordinary item $ 1.08 Extraordinary item (0.20) ---------------------- Net income $ 0.88 ====================== Note 5 - Marketable Securities All investments not included in a money market fund are accounted for under Financial Accounting Standards Board Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Available-for-sale securities are reported at fair value, which is based upon quoted market prices, with unrealized gains and losses, net of tax, reported as a component of other comprehensive income in stockholders' equity until recognized. Unrealized losses are recognized as expense when a decline in fair value is determined to be other than temporary. We recorded a non-cash impairment charge related to our investment in PlanetRx.com, Inc. ("PlanetRx") common stock during the second quarter of 2000 as the loss in value was deemed to be other than temporary. Therefore, any unrealized losses associated with recording our investment in PlanetRx at current market value that we had recorded in stockholders' equity were written off to the current period earnings, in addition to any additional charges necessary to write-down the value of our investment. In the third quarter of 2000, we have written down the value of our investment in PlanetRx an additional $3,605,000 (after tax) as an unrealized loss recognized in stockholders' equity as a component of comprehensive income, as the current unrealized loss is considered to be temporary. At September 30, 2000 and December 31, 1999, available-for-sale securities totaled $4,493,000 and $150,365,000, respectively. As of September 30, 2000, we have recorded a total unrealized loss of $99,732,000, net of taxes, and a realized loss of $905,000, net of taxes. Note 6 - Financing During the third quarter of 2000, we repaid the remaining $35,000,000 outstanding on our revolving credit facility and prepaid $100,000,000 of our Term A loans, which were applied against the scheduled principal payments for fiscal years 2001, 2002 and a portion of the scheduled principal payment for fiscal year 2003. Beginning in March 2003, we are required to make annual principal payments on the Term A loans of $56,750,000 in 2003, $62,700,000 in 2004 and $65,660,000 in 2005. As a result of the prepayment on the Term A loans, we recognized an $898,000, net of tax, extraordinary loss from the write-off of deferred financing fees. In conjunction with the prepayment of the Term A loans, we restructured our existing interest rate swap agreements, reducing the notional amounts of the swaps to a combined $185 million as of September 30, 2000 and $100 million as of October 16, 2000. We received $2,397,000 to restructure our swap agreements, of which $1,500,000 ($926,000 after tax) was recognized against interest expense as an ordinary gain related to the prepayment of debt and the remaining $897,000 has been deferred and will be amortized over the remaining term of the loans. Under the restructured swap agreements, we have, in effect, converted approximately $100 million of our variable rate debt to fixed rate debt until April 2003 when the notional amount reduces to $60 million and April 2004 when the notional amount reduces to $20 million. Note 7 - Restructuring During the second quarter of 1999, we recorded a pre-tax restructuring charge of $9,400,000 associated with the consolidation of our Plymouth, Minnesota facility into our Bloomington, Minnesota facility. In December 1999 and September 2000, the associated accrual was reduced by $2,301,000 and $44,000, primarily as a result of subleasing a portion of the unoccupied space. The consolidation plan includes the relocation of all employees at the Plymouth facility to the Bloomington facility that began in August 1999, with completion delayed until the first quarter of 2001 from the previously disclosed third quarter of 2000. Included in the restructuring charge are anticipated cash expenditures of approximately $4,823,000 for lease termination fees and rent on unoccupied space (which payments will continue through April 2001, when the lease expires) and anticipated non-cash charges of approximately $2,276,000 for the write-down of leasehold improvements and furniture and fixtures. The restructuring charge does not include any costs associated with the physical relocation of the employees. During December 1999, we recorded a pre-tax restructuring charge of $2,633,000 associated with the outsourcing of our computer operations to Electronic Data Systems Corporation. The principal actions of the plan included cash expenditures of approximately $2,148,000 for the transition of 51 employees to the outsourcer and the elimination of contractual obligations of ValueRx, which had no future economic benefit to us, and non-cash charges of approximately $485,000 due to the reduction in the carrying value of certain capitalized software to its net realizable value. This plan was completed during the second quarter of 2000 when remaining cash payments were made. Also in December 1999, we recorded a pre-tax restructuring charge of $969,000 associated with restructuring our Practice Patterns Science, Inc. ("PPS") majority-owned subsidiary and the purchase of the remaining PPS Common Stock from management. The charge consisted of cash expenditures of $559,000 relating to stock compensation expense and $410,000 of severance payments to 9 employees. This plan was completed in January 2000.
Balance at 2000 Balance at December 31, Additions/ 2000 September 30, (in thousands) 1999 (Reversals) Usage 2000 - ------------------------------------------------------------------------------------------------ Non-cash Write-down of long-lived assets $ 28 $ - $ - $ 28 Cash Employee transition costs 1,592 - 1,592 - Stock compensation 559 - 559 - Termination fees and rent 1,338 (44) 1,072 222 ----------------------------------------------------------- $ 3,517 $ (44) $ 3,223 $ 250 ===========================================================
All of the restructuring charges which include tangible assets to be disposed of are written down to their net realizable value, less cost of disposal. We expect recovery to approximate its cost of disposal. Considerable management judgment is necessary to estimate fair value; accordingly, actual results could vary from such estimates. Note 8 - Common Stock The holders of Class A Common Stock have one vote per share and the holders of Class B Common Stock have ten votes per share. NYLife Healthcare Management, Inc., a subsidiary of New York Life Insurance Company, owned all of our outstanding shares of Class B Common Stock at September 30, 2000. The Class B Common Stock automatically converts into shares of our Class A Common Stock upon transfer to any entity other than New York Life or an affiliate of New York Life or otherwise at the option of the holder. On November 7, 2000, NYLife Healthcare Management, Inc. exchanged each outstanding share of Class B Common Stock for one share of our Class A Common Stock and then immediately distributed such shares to NYLIFE LLC, another subsidiary of New York Life. Consequently, as of November 7, 2000, we have reacquired all of our Class B Common Stock and currently hold them as treasury shares. Immediately following the exchange and distribution to NYLIFE LLC, NYLIFE LLC completed the sale of 6,900,000 shares of our Class A Common Stock to the public through a secondary offering. Contemporaneous with this stock offering by NYLIFE LLC, the Express Scripts Automatic Exchange Security Trust, a closed-end investment company that is not affiliated with us, sold 3,450,000 investment units to the public. Upon maturity of the investment units, the Trust may deliver up to 3,450,000 shares of our Class A Common Stock owned by NYLIFE LLC to the holders of the investment units. We will not receive any proceeds from the secondary offering or the offering by the Trust. As a result of these transactions, as of November 7, 2000, we no longer have any shares of Class B Common Stock outstanding. At September 30, 2000, NYLIFE and the holders of Class A Common Stock had control over approximately 86.5% and 13.5%, respectively, of the combined voting power of all classes of common stock. However, as of November 7, 2000, due to the exchange of Class B Common Stock for Class A Common Stock and the completion of the secondary offering described above, NYLIFE LLC had approximately 21.1% of the voting power of our Class A Common Stock, which includes the right to vote 3,450,000 Class A shares that the Trust may deliver upon exchange of the Trust issued investment units. New York Life and its subsidiaries have agreed to vote any shares of our Class A Common Stock prior to delivery thereof by the Trust to the holders of the Trust investment units in the same proportion and to the same effect as the votes cast by our other stockholders at any meeting of stockholders, subject to two exceptions relating to election of directors and approval of our 2000 Long-Term Inventive Plan. In August 2000, the Board of Directors adopted the Express Scripts, Inc. 2000 Long Term Incentive Plan (the "2000 LTIP"), which provides for the grant of various equity awards to our officers, Board of Directors and key employees selected by the Compensation Committee of the Board of Directors. As of September 30, 2000, 233,968 shares of Class A Common Stock have been reserved for issuance under this plan. During the third quarter 2000, we granted 222,865 restricted shares of Class A Common Stock under the 2000 LTIP to certain of our officers and employees. These shares are subject to various cliff-vesting periods from three to ten years with provisions allowing for accelerated vesting based upon specific performance criteria. Prior to vesting, these restricted shares are subject to forfeiture to us without consideration upon termination of employment under certain circumstances. No shares have been forfeited as of November 9, 2000. Unearned compensation of $15,016,000 relating to the restricted shares has been recorded as a separate component of stockholders' equity and is being amortized to non-cash compensation expense over the estimated vesting periods. Subsequent to September 30, 2000, we issued 50,000 shares of restricted stock to Mr. Toan, our President and Chief Executive Officer, under the 2000 LTIP. These shares will vest in full no later than March 31, 2005, subject to acceleration upon certain contingencies. During fourth quarter, unearned compensation of $3,578,000 relating to the restricted shares will be recorded as a separate component of stockholders' equity and will be amortized to non- cash compensation expense over the estimated vesting periods. As of September 30, 2000, we have repurchased a total of 1,265,000 shares of our Class A Common Stock under the stock repurchase program that we announced on October 25, 1996, of which, 790,000 shares were repurchased during the nine months ended September 30, 2000. Approximately 521,000 shares have been utilized for stock option exercises through September 30, 2000. Our Board of Directors approved the repurchase of up to 2,500,000 shares, and placed no limit on the duration of the program. Additional purchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions, subject to restrictions on stock repurchases contained in our bank credit facility and the Indenture under which our Senior Notes were issued. Note 9 - Condensed Consolidated Financial Statements Our Senior Notes are unconditionally and joint and severally guaranteed by our wholly-owned domestic subsidiaries other than Practice Patterns Sciences, Inc., Great Plains Reinsurance Co., ValueRx of Michigan, Inc., Diversified NY IPA, Inc., and Diversified Pharmaceutical Services (Puerto Rico), Inc. Separate financial statements of the Guarantors are not presented as we have determined them not to be material to investors. Therefore, the following condensed consolidating financial information has been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. We believe that this information, presented in lieu of complete financial statements for each of the guarantor subsidiaries, provides sufficient detail to allow investors to determine the nature of the assets held by, and the operations of, each of the consolidating groups. As of January 1, 2000, we undertook an internal corporate reorganization to eliminate various entities whose existence was deemed to be no longer necessary, including, among others, ValueRx Pharmacy Program, Inc. ("ValueRx"), and to create several new entities to house certain activities, including Express Scripts Specialty Distribution Services, Inc. ("SDS") and ESI Mail Pharmacy Service, Inc. ("ESI MPS"). Consequently, the assets, liabilities and operations of ValueRx are incorporated into those of the issuer, Express Scripts, Inc. and the assets, liabilities and operations of SDS and ESI MPS are incorporated into those of the Guarantors for 2000.
Condensed Consolidated Balance Sheet - ------------------------------------------------------------------------------------------------------------------------------ Express (in thousands) Scripts, Inc. Guarantors Non-Guarantors Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------ As of September 30, 2000 Current assets $ 769,953 $ 112,158 $ 5,549 $ - $ 887,660 Property and equipment, net 99,498 20,571 2,425 - 122,494 Investments in subsidiaries 725,696 - 2,261 (727,957) - Investments in marketable securities - 4,493 - - 4,493 Intercompany (329,255) 331,325 (2,070) - - Goodwill, net 253,559 717,355 4,941 - 975,855 Other intangible assets, net 56,760 102,254 300 - 159,314 Other assets 74,372 (67,412) (48) - 6,912 --------------------------------------------------------------------------------- Total assets $ 1,650,583 $ 1,220,744 $ 13,358 $ (727,957) $ 2,156,728 ================================================================================= Current liabilities $ 536,777 $ 480,610 $ 5,097 $ - $ 1,022,484 Long-term debt 426,523 - - - 426,523 Other liabilities 104,861 (66,266) 949 - 39,544 Stockholders' equity 582,422 806,400 7,312 (727,957) 668,177 --------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,650,583 $ 1,220,744 $ 13,358 $ (727,957) $ 2,156,728 ================================================================================= As of December 31, 1999 Current assets $ 549,374 $ 509,702 $ 7,279 $ - $ 1,066,355 Property and equipment, net 39,036 55,776 2,761 - 97,573 Investments in subsidiaries 725,468 - 2,261 (727,729) - Investments in marketable securities - 150,365 - 150,365 Intercompany 463,438 (463,241) (197) - - Goodwill, net 168 976,759 5,569 - 982,496 Other intangible assets, net 22,458 160,901 61 - 183,420 Other assets 13,179 (6,493) 563 (147) 7,102 --------------------------------------------------------------------------------- Total assets $ 1,813,121 $ 1,383,769 $ 18,297 $ (727,876) $ 2,487,311 ================================================================================= Current liabilities $ 527,312 $ 563,457 $ 9,589 $ - $ 1,100,358 Long-term debt 635,873 - - - 635,873 Other liabilities 83,365 (33,018) 1,251 - 51,598 Stockholders' equity 566,571 853,330 7,457 (727,876) 699,482 --------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,813,121 $ 1,383,769 $ 18,297 $ (727,876) $ 2,487,311 =================================================================================
Condensed Consolidated Statement of Operations - ------------------------------------------------------------------------------------------------------------------------------ Express (in thousands) Scripts, Inc. Guarantors Non-Guarantors Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------ Three months ended September 30, 2000 Total revenues $ 1,088,832 $ 644,464 $ 3,193 $ - $ 1,736,489 Operating expenses 1,069,418 613,597 3,322 - 1,686,337 ---------------------------------------------------------------------------------- Operating income (loss) 19,414 30,867 (129) - 50,152 Interest (expense) income, net (8,091) (7) 11 - (8,087) ---------------------------------------------------------------------------------- Income (loss) before tax effect 11,323 30,860 (118) - 42,065 Income tax provision (benefit) 4,645 12,683 (36) - 17,292 ---------------------------------------------------------------------------------- Income (loss) before extraordinary item 6,678 18,177 (82) - 24,773 Extraordinary item (898) - - - (898) ---------------------------------------------------------------------------------- Net income (loss) $ 5,780 $ 18,177 $ (82) $ - $ 23,875 ================================================================================== Three months ended September 30, 1999 Total revenues $ 548,405 $ 522,564 $ 12,527 $ - $ 1,083,496 Operating expenses 517,497 509,031 11,220 - 1,037,748 --------------------------------------------------------------------------------- Operating income 30,908 13,533 1,307 - 45,748 Interest income (expense), net (14,759) (28) 58 - (14,729) --------------------------------------------------------------------------------- Income before tax effect 16,149 13,505 1,365 - 31,019 Income tax provision 12,785 (237) 923 - 13,471 --------------------------------------------------------------------------------- Income before extraordinary item 3,364 13,742 442 - 17,548 Extraordinary item (553) - - - (553) --------------------------------------------------------------------------------- Net income (loss) $ 2,811 $ 13,742 $ 442 $ - $ 16,995 ================================================================================= Nine months ended September 30, 2000 Total revenues $ 3,021,343 $ 1,835,376 $ 8,646 $ - $ 4,865,365 Operating expenses 2,956,552 1,750,303 9,301 - 4,716,156 -------------------------------------------------------------------------------- Operating income (loss) 64,791 85,073 (655) - 149,209 Write-down of marketable securities - (155,500) - - (155,500) Interest (expense) income, net (32,046) (10) 12 - (32,044) -------------------------------------------------------------------------------- Income (loss) before tax effect 32,745 (70,437) (643) - (38,335) Income tax provision (benefit) 13,372 (23,507) (228) - (10,363) -------------------------------------------------------------------------------- Income (loss) before extraordinary item 19,373 (46,930) (415) - (27,972) Extraordinary item (898) - - - (898) -------------------------------------------------------------------------------- Net income (loss) $ 18,475 $ (46,930) $ (415) $ - $ (28,870) ================================================================================ Nine months ended September 30, 1999 Total revenues $ 1,555,908 $ 1,395,718 $ 27,706 $ - $ 2,979,332 Operating expenses 1,468,862 1,374,787 25,472 - 2,869,121 -------------------------------------------------------------------------------- Operating income 87,046 20,931 2,234 - 110,211 Interest income (expense), net (41,682) 183 154 - (41,345) -------------------------------------------------------------------------------- Income before tax effect 45,364 21,114 2,388 - 68,866 Income tax provision 24,351 5,035 1,371 - 30,757 ------------------------------------------------------------------------------- Income before extraordinary item 21,013 16,079 1,017 - 38,109 Extraordinary item (7,150) - - - (7,150) -------------------------------------------------------------------------------- Net income (loss) $ 13,863 $ 16,079 $ 1,017 $ - $ 30,959 ================================================================================
Condensed Consolidated Statement of Cash Flows - ------------------------------------------------------------------------------------------------------------------------------ Express (in thousands) Scripts, Inc. Guarantors Non-Guarantors Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------ Nine months ended September 30, 2000 Net cash (used in) provided by operating activities $ (423,018) $ 583,672 $ (3,338) $ (147) $ 157,169 Cash flows from investing activities: Purchases of property and equipment (79,381) 32,528 (123) - (46,976) Proceeds from sales of property and equipment 8,831 - - - 8,831 Other (966) - - - (966) ---------------------------------------------------------------------------------- Net cash (used in) provided by investing activities (71,516) 32,528 (123) - (39,111) Cash flows from financing activities: Repayment of long-term debt (210,069) - - - (210,069) Repurchase of common stock (30,247) - - - (30,247) Other 11,963 - - - 11,963 Net transactions with parent 798,226 (800,516) 2,143 147 - ---------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 569,873 (800,516) 2,143 147 (228,353) Effective of foreign currency translation adjustment (153) - - - (153) ---------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 75,186 (184,316) (1,318) - (110,448) Cash and cash equivalents at beginning of period 123,722 4,198 4,710 - 132,630 ---------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 198,908 $ (180,118) $ 3,392 $ - $ 22,182 ================================================================================== Nine months ended September 30, 1999 Net cash provided by operating activities $ 30,886 $ 54,814 $ 2,619 $ 298 $ 88,617 Cash flows from investing activities: Purchases of property and equipment (18,797) (6,641) (486) - (25,924) Acquisitions, net of cash acquired - (718,416) - - (718,416) ---------------------------------------------------------------------------------- Net cash (used in) investing activities (18,797) (725,057) (486) - (744,340) Cash flows from financing activities: Repayment of long-term debt (975,000) - - - (975,000) Proceeds from long-term debt 1,288,815 - - - 1,288,815 Net proceeds from issuance of common stock 299,381 - - - 299,381 Financing fees paid (25,437) - - - (25,437) Other 5,781 - - - 5,781 Net transactions with parent (757,167) 752,721 4,744 (298) - ---------------------------------------------------------------------------------- Net cash (used in) provided by financing 593,540 activities (163,627) 752,721 4,744 - Effective of foreign currency translation adjustment 48 - - - 48 ---------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (151,490) 82,478 6,877 - (62,135) Cash and cash equivalents at beginning of period 117,913 2,825 1,851 - 122,589 ---------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ (33,577) $ 85,303 $ 8,728 $ - $ 60,454 ==================================================================================
Note 10 - Segment Reporting We are organized on the basis of services offered and have determined that we have two reportable segments: PBM services and non-PBM services. We manage the pharmacy benefit within an operating segment that encompasses an integrated PBM service. The remaining two operating service lines (IVTx and SDS) are aggregated into a non-PBM reporting segment. The following table presents information about our reportable segments:
(in thousands) PBM Non-PBM Total - ------------------------------------------------------------------------------------------------------------------------ Three months ended September 30, 2000 Total revenues $ 1,715,008 $ 21,481 $ 1,736,489 Income before income taxes 38,350 3,715 42,065 Three months ended September 30, 1999 Total revenues $ 1,066,519 $ 16,977 $ 1,083,496 Income before income taxes 29,017 2,002 31,019 Nine months ended September 30, 2000 Total revenues $ 4,799,768 $ 65,597 $ 4,865,365 (Loss) income before income taxes (52,245) 13,910 (38,335) Nine months ended September 30, 1999 Total revenues $ 2,932,422 $ 46,910 $ 2,979,332 Income before income taxes 63,974 4,892 68,866
Included in PBM income before income taxes for the nine months ended September 30, 2000 is the non-cash write-down of $155,500,000 ($97,032,000 net of tax) of our investment in PlanetRx (see Note 5). Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations In this Item 2, "we," "us," "our" and the "Company" refer to Express Scripts, Inc. and its subsidiaries, unless the context indicates otherwise. Information included in this Quarterly Report on Form 10-Q, and information that may be contained in other filings by us with the Securities and Exchange Commission ("SEC") and releases issued or statements made by us, contain or may contain forward-looking statements, including but not limited to statements of our plans, objectives, expectations or intentions. Such forward-looking statements necessarily involve risks and uncertainties. Our actual results may differ significantly from those projected or suggested in any forward-looking statements. Factors that might cause such a difference to occur include, but are not limited to: o risks associated with managing the termination of the United HealthCare contract o risks associated with our ability to maintain internal growth rates o continued pressure on margins resulting from client demands for enhanced service offerings and higher service levels o competition, including price competition, competition in the bidding and proposal process and our ability to consummate contract negotiations with prospective clients o adverse results in regulatory, 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 o the possible termination of contracts with key clients or providers o the possible loss of relationships with pharmaceutical manufacturers, or changes in pricing, discount or other practices of pharmaceutical manufacturers o adverse results in litigation o risks associated with our leverage and debt service obligations o risks associated with our ability to continue to develop new products, services and delivery channels o developments in the healthcare industry, including the impact of increases in health care costs, changes in drug utilization and cost patterns and introductions of new drugs o other risks described from time to time in our filings with the SEC We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. OVERVIEW We derive our revenues primarily from the sale of PBM services in the United States and Canada. Our PBM revenues generally include administrative fees, dispensing fees and ingredient costs of pharmaceuticals dispensed from retail pharmacies included in one of our networks or from one of our mail pharmacies, and the associated costs are recorded in cost of revenues (the "Gross Basis"). Where we only administer the contracts between our clients and the clients' retail pharmacy networks, as is the case for some of the customer contracts acquired from DPS, we record as revenues only the administrative fee we receive from our activities (the "Net Basis"). We also derive PBM revenues from the sale of informed decision counseling services through our Express Health LineSM division, and the sale of medical information management services (which include the development of data warehouses to combine medical claims and prescription drug claims), disease management support services and quality and outcomes assessments through our Health Management Services ("HMS") division and Practice Patterns Science, Inc. ("PPS") subsidiary. Non-PBM revenues are derived from: o The sale of pharmaceuticals for and the provision of infusion therapy services through our subsidiary IVTx, Inc., doing business as Express Scripts Infusion Services o Administrative fees received from drug manufacturers for the dispensing or distribution of their pharmaceuticals requiring special handling or packaging through our Express Scripts Specialty Distribution Services ("SDS") subsidiary During the first nine months of 2000 we increased our membership to approximately 41.5 million members as of October 1, 2000 compared with 37.5 million members as of October 1, 1999. The membership counts exclude 500,000 and 9.5 million members, respectively, served under the United HealthCare ("UHC") contract, which expired in May 31, 2000. We developed a migration plan to transition the UHC members to their new provider throughout 2000. The migration plan is now substantially complete. Additionally, we continue to develop new products and services for sale to existing clients and pharmaceutical manufacturers and expand the services provided to existing clients. During the first nine months of 2000, approximately 3.8 million members began utilizing expanded services that provide for more advanced formulary management and the addition of mail or network services where only one or two of these services had been previously utilized. We have one of the largest managed care membership bases of any pharmacy benefit management ("PBM") company. Although our membership counts are based on eligibility data provided by our clients, they necessarily involve some estimates, extrapolations and approximations. For example, some plan designs allow for family coverage under a single identification number, and we make assumptions about the average number of persons per family in calculating the membership covered by such plans. Because these assumptions may vary between PBMs, membership counts may not be comparable between our competitors and us. However, we believe our membership count provides a reasonable estimation of the population we serve, and can be used as one measure of our growth. As previously disclosed, on April 1, 1999, we acquired Diversified Pharmaceutical Services, Inc. and Diversified Pharmaceutical Services (Puerto Rico) Inc. (collectively, "DPS"), from SmithKline Beecham Corporation ("SmithKline Beecham") and SmithKline Beecham InterCredit BV for approximately $715 million, which includes a purchase price adjustment for closing working capital and transaction costs. Consequently, our operating results include those of DPS from April 1, 1999. The net assets acquired from DPS have been recorded at their estimated fair value, resulting in $754,236,000 of goodwill that is being amortized over 30 years. This acquisition has been accounted for under the purchase method of accounting. RESULTS OF OPERATIONS REVENUES
Three Months Ended September 30, Nine Months Ended September 30, Increase/ (in thousands) 2000 (Decrease) 1999 2000 Increase 1999 - --------------------------------------------------------------------------------------------------------------------------- PBM Gross Basis revenues $ 1,664,532 66.2% $ 1,001,462 $ 4,613,581 65.1% $ 2,793,787 PBM Net Basis revenues 46,138 (29.1%) 65,057 175,764 26.8% 138,635 Other revenues 4,338 nm - 10,423 nm - ------------------------------------------- ------------------------------------------- Total PBM revenues $ 1,715,008 60.8% $ 1,066,519 $ 4,799,768 63.7% $ 2,932,422 Non-PBM revenues 21,481 26.5% 16,977 65,597 39.8% 46,910 ------------------------------------------- ------------------------------------------- Total revenues $ 1,736,489 60.3% $ 1,083,496 $ 4,865,365 63.3% $ 2,979,332 =========================================== ===========================================
nm = not meaningful Our growth in PBM Gross Basis revenues during the third quarter of 2000 and the nine months ended September 30, 2000 over 1999 is primarily due to a combination of the following factors: the conversion of historical Express Scripts and DPS clients to our retail pharmacy networks; higher drug ingredient costs resulting from price increases for existing drugs and new drugs introduced into the marketplace; increased membership; higher utilization; and the conversion of certain clients to a manufacturer formulary management program in which we derive an administrative fee for our services, which is recorded in revenue, from a program whereby amounts received from pharmaceutical manufacturers are recorded as a reduction of cost of revenues. The increase in revenues for the nine months ended September 30, 2000 is also due to DPS revenues being reported for all of 2000 compared to only two quarters in 1999. These increases were slightly offset by the reduction in Net Basis revenues received under the UHC contract since its termination in May 2000. Network pharmacy claims revenue increased $491,600,000, or 65.7%, and 1,360,958,000, or 64.2%, during the three months and nine months ended September 30, 2000 over 1999, respectively. Network pharmacy claims processed decreased 3,783,000, or 5.0%, to 72,307,000 and increased 42,926,000, or 22.8%, to 231,530,000 for the three months and nine months ended September 30, 2000 over 1999, respectively. The primary reason for the decline in network pharmacy claims processed during the third quarter is the transition of UHC members to another provider. The average revenue per network pharmacy claim increased 74.4% to $17.15 over the third quarter of 1999 primarily as a result of the increased rate of historical Express Scripts and DPS clients moving from retail pharmacy networks contracted by the clients to one contracted by us and higher drug ingredient costs. As previously discussed under "--Overview", we record the associated revenues for clients utilizing our retail pharmacy networks on the Gross Basis, therefore this shift to our retail pharmacy networks results in increased Gross Basis revenues. The average revenue per network pharmacy claim increased 33.7% to $15.04 for the first nine months of 2000 over 1999 also as a result of additional clients moving to one of our retail pharmacy networks, but the percentage change impact is diluted compared to the third quarter due to the three additional months of DPS claims in the first nine months of 2000 over 1999. Mail pharmacy services revenues and mail pharmacy services claims processed increased $148,932,000, or 48.6% and 1,061,000, or 37.3%, respectively, for the third quarter of 2000 over 1999 and $489,283,000, or 62.6% and 3,694,000, or 49.7%, respectively, for the nine months ended September 30, 2000 over 1999. These increases are primarily due to the addition of new members with high mail utilization rates as well as increased utilization by existing members. For the three months and nine months ended September 30, 2000 the average revenue per mail pharmacy claim increased 8.2% and 8.6% over the three months and nine months ended September 30, 1999 primarily due to higher drug ingredient costs, as discussed above. Other revenue increased $4,338,000 and $10,423,000 for the three months and the nine months ended September 30, 2000 over 1999 due to fees received under our agreement with PlanetRx.com, Inc. ("PlanetRx"). Effective July 5, 2000 we restructured our agreement with PlanetRx in exchange for a one-time cash payment of $8,000,000. Approximately $3,700,000 of the payment represents amounts earned through the second quarter of 2000, the remainder represents a fee for the termination of the prior contract and was recorded in the third quarter of 2000. No additional cash payments will be paid to us under the restructured agreement. Additionally, as of September 30, 2000, we retained our ownership of approximately 10.3 million common shares of PlanetRx. The increase in revenue for non-PBM services during 2000 compared to 1999 is primarily due to additional volume within SDS resulting from a new contract that took effect during the fourth quarter of 1999. COST AND EXPENSES
Three Months Ended September 30, Nine Months Ended September 30, Increase/ (in thousands) 2000 (Decrease) 1999 2000 Increase 1999 - --------------------------------------------------------------------------------------------------------------------------- PBM $ 1,588,135 67.9% $ 945,907 $ 4,418,445 68.9% $ 2,615,937 Percentage of total PBM revenues 92.6% 88.7% 92.1% 89.2% Non-PBM 15,515 18.6% 13,080 44,232 20.6% 36,686 Percentage of non-PBM revenues 72.2% 77.0% 67.4% 78.2% ---------------------------------------- ---------------------------------------- Cost of revenues 1,603,650 67.2% 958,987 4,462,677 68.2% 2,652,623 Percentage of total revenues 92.4% 88.5% 91.7% 89.0% Selling, general and administrative 68,206 13.0% 60,367 201,602 22.8% 164,124 Percentage of total revenues 3.9% 5.6% 4.1% 5.5% Depreciation and amortization(1) 14,481 (21.3%) 18,394 51,877 20.7% 42,974 Percentage of total revenues 0.8% 1.7% 1.1% 1.4% Non-recurring expenses - nm - - nm 9,400 Percentage of total revenues nm nm nm 0.3% ---------------------------------------- ---------------------------------------- Total cost and expenses $ 1,686,337 62.5% $ 1,037,748 $ 4,716,156 64.4% $ 2,869,121 ======================================== ======================================== Percentage of total revenues 97.1% 95.8% 96.9% 96.3% (1) Represents depreciation and amortization expense included in selling, general and administrative expenses on our Statement of Operations. Cost of revenues, above, also includes depreciation and amortization expense on property and equipment of $2,675 and $2,060 for the three months ended September 30, 2000 and 1999, respectively and $7,754 and $6,541 for the nine months ended September 30, 2000 and 1999, respectively.
nm = not meaningful Cost of revenues for PBM services as a percentage of total PBM revenues has increased for the three months and the nine months ended September 30, 2000 over 1999. This increase is primarily due to converting both historical Express Scripts and DPS clients from pharmacy networks contracted by the client to one contracted by us, for which we record the drug ingredient cost in cost of revenue (see further discussion under "--Overview"), the establishment of a contract reserve due to pricing issues with a particular client agreement, and continued margin pressures due to pricing. These increases in cost of revenues were partially offset by increases in amounts received from pharmaceutical manufacturers for our formulary management programs during the first nine months of 2000. Cost of revenues for non-PBM services decreased as a percentage of non-PBM revenues in 2000 from 1999 primarily due to additional volume of business within SDS, which represents a larger percentage of non-PBM revenues, where we record as revenue only our administrative fee for distributing pharmaceutical manufacturers' products. SDS was also able to derive operating cost efficiencies as a result of the increase in volume serviced under the contract that took effect in the fourth quarter of 1999, as discussed above. Selling, general and administrative expenses, excluding depreciation and amortization, increased $7,839,000, or 13.0%, in the third quarter of 2000 over 1999 and $37,478,000, or 22.8%, for the first nine months of 2000 over 1999. The increase in 2000 is primarily due to expenditures required to expand the operational and administrative support functions to enhance management of the pharmacy benefit. However, as a percentage of total revenue, selling, general and administrative expenses decreased to 3.9% and 4.1% for the three and nine months ended September 30, 2000 from 5.6% and 5.5% for the three and nine months ended September 30, 1999. Depreciation and amortization expense decreased for the three months ended September 30, 2000 from 1999 primarily as a result of the UHC customer contract intangible asset being fully amortized during the second quarter of 2000. Depreciation and amortization substantially increased for the nine months ended September 30, 2000 over 1999 due to the acquisition of DPS, as 1999 only included amortization of the DPS goodwill and other intangible assets for six months. During the first nine months of 2000, we have recorded amortization expense for goodwill and other intangible assets of $42,294,000 compared to $36,880,000 for the nine months ended September 30, 1999. The remaining increases in 2000 were primarily due to expansion of our operations and enhancement of our information systems to better serve our clients. During the third quarter of 1999, we recorded a pre-tax restructuring charge of $9,400,000 associated with the consolidation of our Plymouth, Minnesota facility into our Bloomington, Minnesota facility. In December 1999 and September 2000, the associated accrual was reduced by $2,301,000 and $44,000, primarily as a result of subleasing a portion of the unoccupied space. The consolidation plan includes the relocation of all employees at the Plymouth facility to the Bloomington facility that began in August 1999, with completion delayed until the first quarter of 2001 from the previously disclosed third quarter of 2000. Included in the restructuring charge are anticipated cash expenditures of approximately $4,823,000 for lease termination fees and rent on unoccupied space (which payments will continue through April 2001, when the lease expires) and anticipated non-cash charges of approximately $2,276,000 for the write-down of leasehold improvements and furniture and fixtures. The restructuring charge does not include any costs associated with the physical relocation of the employees. OTHER INCOME (EXPENSE), NET Our interest expense, net has decreased $6,642,000 and $9,301,000 for the quarter ended and the nine months ended September 30, 2000 compared to 1999. The decrease is a result of utilizing the $299,378,000 proceeds from our June 1999 common stock offering to repay a portion of our credit facility, as well as utilizing $314,131,000 of our own cash to pay-down our credit facility from June 1999 through September 30, 2000. Associated with the prepayment of our loans, we recorded an ordinary gain in interest expense of $1.5 million due to the restructuring of our interest rate swap agreements (see "--Market Risk"). Additionally, we have repurchased $10,115,000 of our Senior Notes as of September of 2000 (see "--Liquidity and Capital Resources"). As previously announced, we recorded a $155,500,000 ($97,032,000 after tax) non-cash impairment charge related to our investment in PlanetRx common stock during the second quarter of 2000 as the loss in value was deemed to be other than temporary. Therefore, any unrealized loss associated with recording our investment in PlanetRx at current market value that we had recorded in stockholders' equity was written off to the current period earnings, in addition to any additional charges necessary to write-down the value of our investment in accordance with Financial Accounting Standards Board Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities". PROVISION FOR INCOME TAXES Our income taxes for the third quarter 2000 and the nine months ended September 30, 2000 were expense of $17,292,000 and a benefit of $10,363,000, respectively. The tax benefit is due primarily to the marketable securities impairment write-down discussed under "--Other Income (Expense), Net". Our effective tax rate for the quarter ended September 30, 2000 and 1999 was 41.1% and 43.4%, respectively. Excluding the $58,468,000 tax benefit from the write-down in 2000 and the $9,400,000 restructuring charge in 1999, our effective tax rate would have been 41.1% and 43.9% for the nine months ended September 30, 2000 and 1999. Our effective tax rate for continuing operations decreased from 1999 primarily due to the reduction in the non-deductible goodwill and customer contract amortization expense associated with the ValueRx acquisition as a percentage of income before income taxes. The goodwill and customer contract amortization for the DPS acquisition is deductible for income tax purposes due to the filing of an Internal Revenue Code ss.338(h)(10) election. NET INCOME AND EARNINGS PER SHARE Our net income increased $6,880,000 to $23,875,000 for the third quarter of 2000 from 1999 and decreased $59,829,000 to a net loss of $28,870,000 for the nine months ended September 30, 2000 from 1999. The following items impacted earnings: o An extraordinary loss on the early retirement of debt due to the write-off of deferred financing fees during the third quarter of 2000 in the amount of $898,000, net of tax (see "--Liquidity and Capital Resources") o An ordinary gain in the amount of $1,500,000 ($926,000 net of tax) on the restructuring of our interest rate swap agreements related to the early retirement of debt during the third quarter of 2000 (see "--Market Risk") o A non-cash impairment charge during the second quarter of 2000 in the amount of $155,500,000 ($97,032,000 net of tax) relating to our PlanetRx investment (see "--Other Income (Expense), Net") o A restructuring charge during the second quarter of 1999 in the amount of $9,400,000 ($5,773,000 net of tax) for the Minneapolis facility consolidation (see "--Cost and Expenses") o An extraordinary loss on the early retirement of debt during the second and third quarters of 1999 in the amount of $6,597,000, net of tax, and $553,000, net of tax, respectively. Excluding these effects on net income for 2000 and 1999 net income per diluted share would have been $0.61 and $0.45 for the third quarter of 2000 and 1999, respectively, and $1.75 and $1.21 for the nine months ended September 30, 2000 and 1999, respectively. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of 2000, net cash provided by operations increased $68,552,000 to $157,169,000 from $88,617,000 in 1999. This increase is primarily due to increased profitability, excluding the effect of writing down the PlanetRx stock (see "--Other Income (Expense), Net"), and bringing our inventory levels back down to our normal operating levels after increasing our inventory during the fourth quarter of 1999 by approximately $30,000,000 for our mail pharmacies' anticipation of potentially higher demand due to our members' Year 2000 concerns. Days sales outstanding ("DSO") increased to 31.2 days at September 2000 from 28.4 days at September 30, 1999. Gross revenues must be used to calculate the days sales outstanding due to the impact of the Gross Basis versus the Net Basis of recording revenues, as discussed in "--Overview" and "--Revenues." The accounts receivable balance includes the cost of the pharmaceutical dispensed, which may not be included in revenues, as required by generally accepted accounting principles, based on the contractual terms embedded in client and pharmacy contracts. The following table presents our days sales outstanding for the periods ended:
Nine Months Ended September 30, (in thousands) 2000 1999 - ------------------------------------------------------------------------------------------- Total revenues $ 4,865,365 $ 2,979,332 Client/pharmacy pass through 2,345,060 2,387,485 ---------------- ---------------- Total $ 7,210,425 $ 5,366,817 ================ ================ Average monthly gross receivables $ 820,072 $ 558,078 ================ ================ DSO 31.2 28.4 ================ ================
Our allowance for doubtful accounts has increased $4,754,000 or 27.5% to $22,035,000 at September 30, 2000 from $17,281,000 at December 31, 1999. As a percentage of at risk receivables (receivables for which we have a corresponding contractual obligation to pay the applicable retail pharmacy), the allowance for doubtful accounts is 3.3% at September 30, 2000 compared to 2.6% at December 31, 1999. We previously announced that we anticipated our cash flow from operations would be temporarily reduced by approximately $20,000,000 due to the termination of the UHC contract during the third quarter of 2000. We subsequently negotiated a revision to the previously announced transition plan with UHC which extended the transition period and delayed the anticipated temporary cash reduction to the fourth quarter of 2000 and the first quarter of 2001. As of September 30, 2000, the transition of UHC members is substantially complete. We expect to fund the termination of the UHC contract in 2000 and 2001 primarily with operating cash flow. We will continue to utilize our operating cash flows for future debt prepayments, stock repurchases, integration costs, technology initiatives and other normal operating cash needs as we deem appropriate. Our capital expenditures for the nine months ended September 30, 2000 increased $21,052,000, or 81.2%, over 1999 primarily due to integration related activities as a result of our acquisitions, our concerted effort to invest in our information technology to enhance the services provided to our clients and the continued renovation of our St. Louis operations facility. We expect to continue investing in technology that will provide efficiencies in operations, manage growth and enhance the service provided to our clients. We expect to fund future anticipated capital expenditures primarily with operating cash flow or, to the extent necessary, with working capital borrowings under our $300 million revolving credit facility, discussed below. During September 2000, we sold our Albuquerque, New Mexico property and building for $7,806,000. These assets were then leased back from the purchaser over a period of 10 years with the option to extend the terms up to an additional 10 years. The resulting lease is being accounted for as an operating lease, and the resulting deferred gain of $4,136,000 is being amortized over the 10 year life of the lease. During the first nine months of 2000, we utilized our own internally generated cash to repay $100,000,000 on our bank revolving credit facility (described below), prepay $100,000,000 of our Term A loans (described below), repurchase $10,115,000 of our Senior Notes on the open market and repurchase 790,000 shares of our Class A Common Stock for $30,247,000. As of September 30, 2000, we have repurchased a total of 1,265,000 shares of our Class A Common Stock under the stock repurchase program that we announced on October 25, 1996. Our Board of Directors approved the repurchase of up to 2,500,000 shares, and placed no limit on the duration of the program. Additional debt repayments or common stock repurchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions, subject to restrictions on stock repurchases contained in our bank credit facility and the Indenture which governs our Senior Notes. We have a credit facility with a bank syndicate led by Credit Suisse First Boston and Bankers Trust Company consisting of $285 million of Term A loans and a $300 million revolving credit facility. As a result of the $100 million prepayment of our Term A loans noted above, we recorded an extraordinary charge during the third quarter of 2000 for the deferred financing fees in the amount of $898,000, net of tax. The prepayments on the Term A loans eliminate the scheduled principal payments for fiscal years 2001, 2002 and a portion of the scheduled principal payment for fiscal year 2003. Beginning in March 2003, we are required to make annual principal payments on the Term A loans of $56,750,000 in 2003, $62,700,000 in 2004 and $65,660,000 in 2005. The credit facility is secured by the capital stock of each of our existing and subsequently acquired domestic subsidiaries, excluding Practice Patterns Science, Inc., Great Plains Reinsurance, ValueRx of Michigan, Inc., Diversified NY IPA, Inc. and Diversified Pharmaceutical Services (Puerto Rico), Inc., and is also secured by 65% of the stock of our foreign subsidiaries. The credit facility requires us to pay interest quarterly on an interest rate spread based on several London Interbank Offered Rates ("LIBOR") or base rate options. Using a LIBOR spread, the Term A loans had an interest rate of 8.16% on September 30, 2000. Effective July 2000, the LIBOR interest rate spread was reduced from 2% to 1.5% and effective October 2000, reduced to 1.0% based upon calculations set forth in our credit facility. To alleviate interest rate volatility, we have entered into two separate swap arrangements, which are discussed in "--Market Risk" below. The credit facility contains covenants that limit the indebtedness we may incur, dividends paid and the amount of annual capital expenditures. The covenants also establish a minimum interest coverage ratio, a maximum leverage ratio, and a minimum fixed charge coverage ratio. In addition, we are required to pay an annual fee of 0.375%, payable in quarterly installments, on the unused portion of the revolving credit facility ($300 million at September 30, 2000). At September 30, 2000, we are in compliance with all covenants associated with the credit facility. In June 1999, we issued $250 million of 9 5/8% Senior Notes due 2009, which require interest to be paid semi-annually on June 15 and December 15. The Senior Notes are callable at specified rates beginning in June 2004. The Senior Notes are unconditionally and joint and severally guaranteed by our wholly-owned domestic subsidiaries other than PPS, Great Plains Reinsurance Co., ValueRx of Michigan, Inc., Diversified NY IPA, Inc., and Diversified Pharmaceutical Services (Puerto Rico), Inc. During the second quarter of 2000, we repurchased $10,115,000 of our Senior Notes on the open market for $10,150,000, which includes $385,000 of accrued interest. We regularly review potential acquisitions and affiliation opportunities. We believe that available cash resources, bank financing or the issuance of additional common stock could be used to finance future acquisitions or affiliations. However, there can be no assurance we will make new acquisitions or affiliations in 2000 or thereafter. OTHER MATTERS The holders of Class A Common Stock have one vote per share and the holders of Class B Common Stock have ten votes per share. NYLife Healthcare Management, Inc., a subsidiary of New York Life Insurance Company, owned all of our outstanding shares of Class B Common Stock at September 30, 2000. The Class B Common Stock automatically converts into shares of our Class A Common Stock upon transfer to any entity other than New York Life or an affiliate of New York Life or otherwise at the option of the holder. On November 7, 2000, NYLife Healthcare Management, Inc. exchanged each outstanding share of Class B Common Stock for one share of our Class A Common Stock and then immediately distributed such shares to NYLIFE LLC, another subsidiary of New York Life. Consequently, as of November 7, 2000, we have reacquired all of our Class B Common Stock and currently hold them as treasury shares. Immediately following the exchange and distribution to NYLIFE LLC, NYLIFE LLC completed the sale of 6,900,000 shares of our Class A Common Stock to the public through a secondary offering. Contemporaneous with this stock offering by NYLIFE LLC, the Express Scripts Automatic Exchange Security Trust, a closed-end investment company that is not affiliated with us, sold 3,450,000 investment units to the public. Upon maturity of the investment units, the Trust may deliver up to 3,450,000 shares of our Class A Common Stock owned by NYLIFE LLC to the holders of the investment units. We will not receive any proceeds from the secondary offering or the offering by the Trust. At September 30, 2000, NYLIFE and the holders of Class A Common Stock had control over approximately 86.5% and 13.5%, respectively, of the combined voting power of all classes of common stock. However, as of November 7, 2000, due to the exchange of Class B Common Stock for Class A Common Stock and the completion of the secondary offering described above, NYLIFE LLC had approximately 21.1% of the voting power of our Class A Common Stock, which includes the right to vote 3,450,000 Class A shares that the Trust may deliver upon exchange of the Trust issued investment units. New York Life and its subsidiaries have agreed to vote any shares of our Class A Common Stock prior to delivery thereof by the Trust to the holders of the Trust investment units in the same proportion and to the same effect as the votes cast by our other stockholders at any meeting of stockholders, subject to two exceptions relating to election of directors and approval of our 2000 Long-Term Inventive Plan. The shareholders of Centre d'autorisation et de paiement des services de sante, a leading Quebec-based PBM commonly referred to as CAPSS, accepted the offer made by our Canadian subsidiary, ESI Canada, Inc., to acquire all of the outstanding shares of CAPSS, subject to regulatory approval and satisfaction of certain conditions, for approximately CDN$25 million (approximately US$16.5 million). The transaction, which is expected to close by year-end, will add approximately 1.5 million lives to ESI Canada's membership base. The transaction is not expected to be dilutive to earnings in 2001 and is expected to be slightly accretive in 2002. In June 1998, Financial Accounting Standards Board Statement 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133") was issued. FAS 133 requires all derivatives to be recognized as either assets or liabilities in the statement of financial position and measured at fair value. In addition, FAS 133 specifies the accounting for changes in the fair value of a derivative based on the intended use of the derivative and the resulting designation. The effective date for FAS 133 was originally effective for all fiscal quarters of fiscal years beginning after June 15, 1999. However, the Financial Accounting Standards Board has deferred the effective date so that it will begin for all fiscal quarters of fiscal years beginning after June 15, 2000, and will be applicable to our first quarter of fiscal year 2001. Our present interest rate swaps will be considered cash flow hedges. Accordingly, the change in the fair value of the swaps will be reported on the balance sheet as an asset or liability. The corresponding unrealized gain or loss and any changes in unrealized gain or loss from the initial measurement date representing the effective portion of these hedges will be initially recognized in stockholders' equity and other comprehensive income. If we had adopted FAS 133 as of September 30, 2000, we would have recorded the unrealized gain of $1,747,000 as an asset and increase in stockholders' equity and other comprehensive income. In December 1999, the SEC issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain areas of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. In June 2000, the SEC issued SAB 101B to defer the effective date for implementation of SAB 101 until the fourth quarter of fiscal 2000. We believe that the necessary adjustments to our current revenue recognition policies in order to comply with SAB 101 will not have a materially adverse effect on our financial statements. The U.S. Secretary of Health and Human Services has issued proposed rules under the Federal Health Insurance Portability and accountability Act of 1996 ("HIPAA") which, when adopted, will establish standards for the use and disclosure of personally identifiable health care information and for the system security necessary for the maintenance and transmission of such information. We believe we will be subject to the final regulations when issued. We believe we will be able to comply fully with the proposed regulations, but we will incur costs in making required changes to our information systems and in training our employees to comply with the new regulations. We have retained a consulting firm to assist in evaluating the extent of the work that would be required to comply with HIPAA. Until we have completed the evaluation, we are unable to estimate the total cost to comply with HIPAA. The costs we will incur to comply with HIPAA will be expensed as incurred or capitalized in accordance with existing accounting policies and funded through our operating cash flows or our revolving credit facility. IMPACT OF INFLATION Changes in prices charged by manufacturers and wholesalers for pharmaceuticals affect our revenues and cost of revenues. To date, we have been able to recover price increases from our clients under the terms of our agreements, although under selected arrangements in which we have performance measurements on drug costs with our clients we could be adversely affected by inflation in drug costs if the result is an overall increase in the cost of the drug plan to the client. To date, changes in pharmaceutical prices have not had a significant adverse affect on us. MARKET RISK In conjunction with the prepayment of the Term A loans, we restructured our existing interest rate swap agreements, reducing the notional amounts of the swaps to a combined $185 million as of September 30, 2000 and $100 million as of October 16, 2000. We received $2,397,000 to restructure our swap agreements, of which $1,500,000 ($926,000 after tax) was recognized against interest expense as an ordinary gain related to the prepayment of debt and the remaining $897,000 has been deferred and will be amortized over the remaining term of the loans. Our first interest rate swap agreement became effective during 1998 and has a notional principal amount of $170 million with a fixed rate of interest of 5.88% per annum, plus the interest rate spread of 1.5% (1.0% effective October 2000) as of September 30, 2000. Under the restructured agreement, the notional principal amount reduces to $49 million in October 2000 and will reduce to approximately $47 million in April 2001 until maturing in October 2001. Our second interest rate swap agreement became effective during 2000 and has a notional principal amount of $15 million with a fixed rate of interest of 6.25% per annum, plus the interest rate spread of 1.5% (1.0% effective October 2000) as of September 30, 2000. Under the restructured agreement, the notional principal amount increased to $51 million in October 2000, will increase to approximately $53 million in April 2001, to approximately $98 million in October 2001 and to $100 million in April 2002. Beginning in April 2003, the notional principal amount will be reduced to $60 million and in April 2004 will be reduced to $20 million until maturing in April 2005. As a result, we have, in effect, converted 100% of our variable rate debt to fixed rate debt under our Credit Facility at September 30, 2000. Beginning in October 2000, we will have converted approximately $100 million of our variable rate debt to fixed rate debt until April 2003 when the notional amount reduces to $60 million and April 2004 when the notional amount reduces to $20 million. Interest rate risk is monitored on the basis of changes in the fair value and a sensitivity analysis is used to determine the impact interest rate changes will have on the fair value of the interest rate swaps, measuring the change in the net present value arising from the change in the interest rate. The fair value of the swaps are then determined by calculating the present value of all cash flows expected to arise thereunder, with future interest rate levels implied from prevailing mid-market yields for money-market instruments, interest rate futures and/or prevailing mid-market swap rates. Anticipated cash flows are then discounted on the assumption of a continuously compounding zero-coupon yield curve. A 10 basis point decline in interest rates at September 30, 2000 would have caused the fair value of the swaps to decrease by $424,000, resulting in a fair value of $1,323,000. Item 3. Quantitative and Qualitative Disclosures About Market Risk Response to this item is included in Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Market Risk" above. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See Index to Exhibits on page 23. -------- (b) Reports on Form 8-K. ------------------- (i) On July 21, 2000, we filed a Current Report on Form 8-K, dated July 19, 2000 under Items 5 and 7, regarding a press release we issued concerning our second quarter 2000 financial performance. 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: November 10, 2000 By: /s/ Barrett A. Toan --------------------------- Barrett A. Toan, President and Chief Executive Officer Date: November 10, 2000 By: /s/ George Paz --------------------------- George Paz, Senior Vice President and Chief Financial Officer INDEX TO EXHIBITS (Express Scripts, Inc. - Commission File Number 0-20199) Exhibit Number Exhibit 2.1(2) Stock Purchase Agreement by and among SmithKline Beecham Corporation, SmithKline Beecham InterCredit BV and Express Scripts, Inc., dated as of February 9, 1999, and certain related Schedules, incorporated by reference to Exhibit No. 2.1 to the Company's Current Report on Form 8-K filed February 18, 1999. 2.2 Asset Contribution and Reorganization Agreement dated August 31, 1999 by and among PlanetRx.com, Inc., PRX Holdings, Inc., PRX Acquisition, Corp., YourPharmacy.com, Inc., and Express Scripts, Inc. (incorporated by reference to the Exhibit No. 2.1 to PlanetRx's Registration Statement on Form S-1, as amended (Registration Number 333-82485)). 3.1 Certificate of Incorporation of the Company, as amended, incorporated by reference to Exhibit No. 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ending June 30, 1999. 3.2 Second Amended and Restated Bylaws, as amended, incorporated by reference to Exhibit No. 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ending September 30, 1998. 4.1 Form of Certificate for Class A Common Stock, incorporated by reference to Exhibit No. 4.1 to the Company's Registration Statement on Form S-1 filed June 9, 1992 (Registration Number 33-46974). 4.2 Indenture, dated as of June 16, 1999, among the Company, Bankers Trust Company, as trustee, and Guarantors named therein, incorporated by reference to Exhibit No. 4.4 to the Company's Registration Statement on Form S-4 filed August 4, 1999 (No. 333-83133). 4.3 Supplemental Indenture, dated as of October 6, 1999, to Indenture dated as of June 16, 1999, among the Company, Bankers Trust Company, as trustee, and Guarantors named therein, incorporated by reference to Exhibit No. 4.3 to the Company's Annual Report on Form 10-K for the year ending December 31, 1999. 4.4 Second Supplemental Indenture, dated as of July 19, 2000, to Indenture dated as of June 16, 1999, among the Company, Bankers Trust Company, as trustee, and Guarantors named therein, incorporated by reference to Exhibit No. 4.4 to the Company's Quarterly Report on Form 10-Q for the quarter ending June 30, 1999. 4.5 Stockholder and Registration Rights Agreement dated as of October 6, 2000 between the Company and New York Life Insurance Company, incorporated by reference to Exhibit No. 4.2 to the Company's Amendment No. 1 to the Registration Statement on Form S-3 filed October 17, 2000 (Registration Number 333-47572). 4.6 Asset Acquisition Agreement dated October 17, 2000, between NYLIFE Healthcare Management, Inc., the Company, NYLIFE LLC and New York Life Insurance Company, incorporated by reference to Exhibit No. 4.3 to the Company's Amendment No. 1 to the Registration Statement on Form S-3 filed October 17, 2000 (Registration Number 333-47572). 10.1 Amendment to the Employment Agreement between the Company and Barrett A. Toan, incorporated by reference to Exhibit No. 10.1 to the Company's Current Report on Form 8-K filed October 18, 2000. 27(1) Financial Data Schedule (provided for the information of the U.S. Securities and Exchange Commission only). 1 Filed herein. 2 The Company agrees to furnish supplementally a copy of any omitted schedule to this agreement to the Commission upon request. EX-27 2 0002.txt FDS
5 0000885721 Express Scripts, Inc. 1,000 U.S. Dollars 3-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 1 22,182 0 790,145 22,035 71,141 887,660 188,958 66,464 2,156,728 1,022,484 426,523 0 0 392 667,785 2,156,728 1,732,151 1,736,489 1,603,650 1,686,337 0 0 10,861 42,065 17,292 24,773 0 898 0 23,875 0.62 0.61
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