-----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, UVqQFpvHy2cr71Ox5Nv+OI5EhSQSH3GlljGskb9cAuOc9Vvr7sE7t5LeLjGM2PJj f/GRHMvlER89osiw90LQmA== 0000885721-04-000199.txt : 20041103 0000885721-04-000199.hdr.sgml : 20041103 20041103172506 ACCESSION NUMBER: 0000885721-04-000199 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041102 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041103 DATE AS OF CHANGE: 20041103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPRESS SCRIPTS INC CENTRAL INDEX KEY: 0000885721 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 431420563 STATE OF INCORPORATION: DE FISCAL YEAR END: 1202 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20199 FILM NUMBER: 041117189 BUSINESS ADDRESS: STREET 1: 13900 REIVERPORT DRIVE CITY: MARYLAND HEIGHTS STATE: MO ZIP: 63043 BUSINESS PHONE: 3147701666 MAIL ADDRESS: STREET 1: 13900 REIVERPORT DRIVE CITY: MARYLAND HEIGHTS STATE: MO ZIP: 63043 8-K 1 q3-04earnings8k.htm EARNINGS RELEASE Q3-04

UNITED STATES
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 (Date of earliest event reported): November 3, 2004

EXPRESS SCRIPTS, INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE 0-20199 43-1420563
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)


13900 Riverport Drive, Maryland Heights, MO 63043
 (Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number including area code: 314-770-1666

No change since last report
(Former Name or Address, if Changed Since Last Report)

        Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

        |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

        |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

        |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

        |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.      Results of Operations and Financial Conditions

                   The following information is furnished under Item 2.02 of this report on Form 8-K:

                   On November 3, 2004 Express Scripts, Inc. (the"Company") issued a press release with respect to its results of operations for the third quarter of 2004. The press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.


Item 8.01.      Other Events

                    On November 3, 2004, Express Scripts, Inc. (the "Company") issued a press release. Selected unaudited financial information included in such press release is attached hereto as Exhibit 99.2 and incorported herein by reference.


Item 9.01.      Financial Statements and Exhibits

                   (c)   The following Exhibits are filed as part of this report on Form 8-K:

                           Exhibit 99.1     Press Release, dated November 3, 2004.

                           Exhibit 99.2     Selected unaudited financial information from the Company’s press release
                    dated November 3, 2004.




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: November 3, 2004 By:       /s/ Barrett A. Toan      
Barrett A. Toan
Chairman and Chief Executive Officer







EXHIBIT INDEX

Exhibit No.

 Description

99.1 Press release, dated November 3, 2004
99.2 Unaudited Financial Information, dated November 3, 2004
 EX-99 2 q3-04pressrelease.htm PRESS RELEASE

Exhibit 99.1

Contact:
Edward Stiften, Chief Financial Officer
David Myers, Vice President Investor Relations
(314) 702-7173
investor.relations@express-scripts.com

Express Scripts Reports Third Quarter Earnings
Mail Pharmacy and Generic Utilization Set Records
Gross Profit up 14%

ST.  LOUIS,  November 3, 2004—Express Scripts, Inc. (Nasdaq: ESRX) announced third quarter net income of $62.0 million, or $0.80 per diluted share, which includes a charge of $0.20 per diluted share to increase reserves for legal defense costs. For the same quarter last year, the Company reported net income of $64.5 million, or $0.81 per diluted share.

        The Company generated $150.0 million of cash flow from operations in the third quarter compared with $160.8 million in the same quarter last year. Cash flow for the 2003 quarter was positively impacted by improved inventory management resulting from implementing a new wholesale purchasing agreement. Year-to-date, cash flow from operations was $303.3 million compared to $281.4 million last year. During the quarter, the Company repurchased 1,737,000 shares of common stock for $108.1 million.

        “The record level utilization of generics and mail pharmacy services, including specialty injectables, demonstrates our commitment to making the use of prescription drugs more affordable,” stated Barrett Toan, chairman and chief executive officer. “We are very proud of the work we have done in developing strategies that help clients manage their prescription drug trend. By increasing savings for our clients through higher generic drug use and more mail pharmacy services, including specialty drugs, Express Scripts’ profitability has improved, demonstrating that our interests are aligned with our clients and their members.”

Strong Operating Results

        Revenues for the third quarter of 2004 were $3.8 billion, a 16 percent increase over the same quarter last year due to increased use of prescription drugs, the acquisition of CuraScript and drug price inflation. Increased use of lower-cost generic drugs (approximately 51 percent of total prescriptions compared to 47 percent last year), and increased member co-payments to retail network pharmacies, which the Company does not record as revenue, partially offset these increases.

        Mail pharmacy prescriptions increased 22 percent to 10.0 million during the quarter from 8.2 million last year. “Members taking long-term maintenance medications increasingly are discovering that our cost effective, highly efficient mail pharmacy services will save them time and money,” noted Toan. “In addition, CuraScript continues to exceed our expectations due to its success in providing specialty pharmacy services to our existing clients, resulting in a cost-effective, single-source solution for specialty drugs.”

        Retail network claims processed in the third quarter were 101.8 million, an increase of 13 percent over the 90.4 million processed last year. The increase in retail claims reflects increased membership including the June 1st implementation of the TRICARE Retail Pharmacy (“TRICARE”) program for the Department of Defense. Total adjusted claims reached a record 132.6 million, a 15 percent increase over last year.

        Gross profit for the third quarter increased 14 percent to $235.4 million from $206.8 million last year reflecting the growth in mail and retail prescriptions, higher generic utilization and increased management of specialty drugs. “Plan sponsors are taking a more active approach in managing drug costs, adopting a variety of proven as well as innovative management tools,” added Toan. Gross profit per adjusted claim decreased slightly from $1.79 to $1.77, primarily reflecting the impact the new TRICARE contract, which generates a lower profit per claim than our fully integrated pharmacy benefit management business.

        As reported last quarter, the Company is a defendant in litigation involving its contract to provide prescription drug benefits for the State of New York Empire Plan. Moreover, the Company has received civil investigative demands from 22 states and the District of Columbia. In light of these developments, the Company projected that in the third quarter it would increase its legal reserves for the estimated costs of defense in litigation matters in a range then estimated at from $15 million to $20 million. Subsequently, several shareholder class action lawsuits and additional business practices class action lawsuits were filed against the Company. In light of these additional legal developments, the Company has reevaluated the adequacy of its legal reserves and recorded a charge to selling, general and administrative expenses of $25.0 million ($15.4 million net of tax), or $0.20 per diluted share for the estimated costs of defense. As a result, operating income decreased from $113.5 million to $104.6 million in the third quarter; however, adjusted operating income, which excludes this legal reserve charge, increased 14 percent to $129.6 million.

        For the quarter, EBITDA was $122.3 million; however, adjusted EBITDA, which excludes the legal reserve charge, was $147.3 million, an increase of 16 percent over last year. On a per adjusted claim basis, adjusted EBITDA was $1.11, an increase over the $1.09 reported last year. The positive impact on EBITDA from increased generic utilization and mail pharmacy services, including the management of specialty drugs, was mostly offset by the lower per-claim profit of the TRICARE claims discussed above.

Earnings Guidance

        During 2004, the Company incurred $0.29 per diluted share in net charges consisting of $0.13 for charges for the early retirement of debt, $0.20 for legal defense costs discussed above, and $0.04 for the contract termination payment the Company received in the first quarter. Express Scripts believes that its 2004 reported diluted earnings per share will be in the range of $3.57 and $3.59, including the $0.29 of net charges, or in the range of $3.86 and $3.88 if the $0.29 of net charges are excluded).

        In light of the current litigation environment in which the Company operates, and the fact that the Company’s financial planning process is not yet complete, Express Scripts expects to provide 2005 earnings guidance in a separate release no later than mid December.

        Express Scripts, Inc. is one of the largest PBM companies in North America providing PBM services to over 50 million members through facilities in thirteen states and Canada. Express Scripts serves thousands of client groups, including managed care organizations, insurance carriers, third-party administrators, government-sponsored benefit plans, employers, and union-sponsored benefit plans.

        Express Scripts provides integrated PBM services, including network pharmacy claims processing, mail pharmacy services, benefit design consultation, drug utilization review, formulary management, disease management, medical and drug data analysis services, and medical information management services. The Company also provides distribution services for specialty pharmaceuticals. 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:

  •   costs of and adverse results in litigation, including a number of pending class action cases that challenge certain of our business practices
  •   risks arising from investigations of certain PBM practices and pharmaceutical pricing, marketing and distribution practices currently being conducted by the U.S. Attorney offices in Philadelphia and Boston, and by other regulatory agencies including the Department of Labor, and various state attorneys general
  •   risks and uncertainties regarding the implementation and the ultimate terms of the Medicare prescription drug benefit, including financial risks to us if we participate in the program on a risk-bearing basis
  •   risks associated with our acquisitions (including our acquisition of CuraScript) which include integration risks and costs, risks of client retention and repricing of client contracts, and risks associated with the operations of acquired businesses
  •   risks associated with our ability to maintain growth rates, or to control operating or capital costs
  •   continued pressure on margins resulting from client demands for lower prices, enhanced service offerings and/or higher service levels, and the possible termination of, or unfavorable modification to, contracts with key clients or providers
  •   competition in the PBM industry, and our ability to consummate contract negotiations with prospective clients, as well as competition from new competitors offering services that may in whole or in part replace services that we now provide to our customers
  •   adverse results in regulatory matters, the adoption of new legislation or regulations (including increased costs associated with compliance with new laws and regulations), more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations
  •   increased compliance risks relating to our contracts with the DoD TRICARE Plan and various state governments and agencies
  •   the possible loss, or adverse modification of the terms, of relationships with pharmaceutical manufacturers, or changes in pricing, discount or other practices of pharmaceutical manufacturers
  •   risks associated with the use and protection of the intellectual property we use in our business
  •   risks associated with our leverage and debt service obligations, including the effect of certain covenants in our borrowing agreements
  •   risks associated with our ability to continue to develop new products, services and delivery channels
  •   general developments in the health care industry, including the impact of increases in health care costs, changes in drug utilization and cost patterns and introductions of new drugs
  •   increase in credit risk relative to our clients due to adverse economic trends
  •   risks associated with our inability to attract and retain qualified personnel
  •   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.

FINANCIAL TABLES FOLLOW



EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations

Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in thousands, except per share data) 2004
 2003
 2004
 2003
Revenues 1     $ 3,767,690   $ 3,248,602   $ 11,175,010   $ 9,806,780  
Cost of revenues 1    3,532,280    3,041,825    10,494,291    9,173,155  
   Gross profit    235,410    206,777    680,719    633,625  
Selling, general and administrative    130,806    93,286    322,773    302,027  
Operating income    104,604    113,491    357,946    331,598  
Other (expense) income:  
   Undistributed loss from joint venture    (954 )  (1,436 )  (3,754 )  (4,520 )
   Interest income    867    756    2,492    2,345  
   Interest expense    (4,248 )  (8,430 )  (37,118 )  (33,172 )
     (4,335 )  (9,110 )  (38,380 )  (35,347 )
Income before income taxes    100,269    104,381    319,566    296,251  
Provision for income taxes    38,352    39,839    122,266    113,054  
Income before cumulative effect of accounting change    61,917    64,542    197,300    183,197  
Cumulative effect of accounting change, net of tax    --    --    --    (1,028 )
Net income   $ 61,917   $ 64,542   $ 197,300   $ 182,169  

Basic earnings per share:		  
   Before cumulative effect of accounting change   $ 0.81   $ 0.82   $ 2.57   $ 2.34  
   Cumulative effect of accounting change    --    --    --    (0.01 )
   Net income   $ 0.81   $ 0.82   $ 2.57   $ 2.33  

Weighted average number of common shares		  
   Outstanding during the period - Basic EPS    76,126    78,666    76,902    78,197  
Diluted earnings per share:  
   Before cumulative effect of accounting change   $ 0.80   $ 0.81   $ 2.53   $ 2.30  
   Cumulative effect of accounting change    --    --    --    (0.01 )
   Net income   $ 0.80   $ 0.81   $ 2.53   $ 2.29  

Weighted average number of common shares		  
   Outstanding during the period - Diluted EPS    77,176    80,023    78,071    79,401  

1 Excludes estimated retail pharmacy co-payments of $1,363,991 and $1,326,022 for the three months ended September 30, 2004 and 2003, respectively, and $4,148,590 and $3,995,580 for the nine months ended September 30, 2004 and 2003, respectively. These are amounts we instructed retail pharmacies to collect from members. We have no information regarding actual co-payments collected.

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet

(in thousands, except share data) September 30,
2004
 December 31,
2003
Assets            
Current assets:  
   Cash and cash equivalents   $ 161,161   $ 396,040  
   Receivables, net    1,073,726    1,011,154  
   Inventories    151,581    116,375  
   Deferred taxes    18,424    15,346  
   Prepaid expenses and other current assets    23,610    21,220  
        Total current assets    1,428,502    1,560,135  
Property and equipment, net    177,764    177,312  
Goodwill, net    1,706,842    1,421,493  
Other intangible assets, net    244,630    232,059  
Other assets    34,837    18,175  
        Total assets   $ 3,592,575   $ 3,409,174  
Liabilities and Stockholders' Equity  
Current liabilities:  
   Claims and rebates payable   $ 1,178,120   $ 1,145,028  
   Accounts payable    306,547    265,875  
   Accrued expenses    218,540    216,505  
   Current maturities of long-term debt    22,056    --  
        Total current liabilities    1,725,263    1,626,408  
Long-term debt    417,607    455,018  
Other liabilities    176,824    133,755  
        Total liabilities    2,319,694    2,215,181  
Stockholders' equity:  
   Preferred stock, $0.01 par value per share, 5,000,000 shares authorized,  
      and no shares issued and outstanding    --    --  
   Common Stock, $0.01 par value per share, 275,000,000 and 181,000,000  
      shares authorized, respectively, and 79,770,000 and 79,795,000 shares  
      issued and outstanding, respectively    797    798  
   Additional paid-in capital    468,635    484,663  
   Unearned compensation under employee compensation plans    (22,051 )  (23,302 )
   Accumulated other comprehensive income    5,975    3,638  
   Retained earnings    1,061,850    864,550  
     1,515,206    1,330,347  
   Common Stock in treasury at cost, 3,786,000 and 2,223,000  
      shares, respectively    (242,325 )  (136,354 )
        Total stockholders' equity    1,272,881    1,193,993  
        Total liabilities and stockholders' equity   $ 3,592,575   $ 3,409,174  

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Cash Flows

Nine Months Ended
September 30,
(in thousands) 2004
 2003
Cash flows from operating activities:            
   Net income   $ 197,300   $ 182,169  
   Adjustments to reconcile net income to net cash  
      provided by operating activities, excluding  
      the effect of the acquisition:  
        Depreciation and amortization    50,477    39,687  
        Non-cash adjustments to net income    57,081    65,548  
        Net changes in operating assets and liabilities    (1,582 )  (6,008 )
Net cash provided by operating activities    303,276    281,396  
Cash flows from investing activities:  
   Purchases of property and equipment    (33,387 )  (32,012 )
   Acquisition, net of cash acquired, and investment in joint venture    (331,136 )  3,560  
   Loan to Pharmacy Care Alliance    (14,050 )  --  
   Other    103    15  
Net cash used in investing activities    (378,470 )  (28,437 )
Cash flows from financing activities:  
   Proceeds from long-term debt    675,564    50,000  
   Repayment of long-term debt    (740,455 )  (160,430 )
   Proceeds from revolving credit line, net    50,000    --  
   Treasury stock acquired    (160,286 )  (79,073 )
   Deferred financing fees    (6,036 )  --  
   Net proceeds from employee stock plans    21,256    35,908  
Net cash used in financing activities    (159,957 )  (153,595 )
Effect of foreign currency translation adjustment    272    2,292  
Net (decrease) increase in cash and cash equivalents    (234,879 )  101,656  
Cash and cash equivalents at beginning of period    396,040    190,654  
Cash and cash equivalents at end of period   $ 161,161   $ 292,310  

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.
Table 1
Unaudited Operating Statistics
(in thousands, except per claim)

3 months
ended
9/30/2004
 3 months
ended
6/30/2004
 3 months
ended
3/31/2004
 3 months
ended
12/31/2003
 3 months
ended
9/30/2003
 Claims Detail                            
 Network (1)    101,784    95,729    93,517    95,808    90,427  
 Mail    9,972    9,752    9,266    8,624    8,156  
   Total PBM claims    111,756    105,481    102,783    104,432    98,583  
 Non-PBM claims (2)    929    829    793    859    896  
   Total claims    112,685    106,310    103,576    105,291    99,479  
   Adjusted claims (3)    132,629    125,814    122,108    122,539    115,791  
 Per Adjusted Claim   
 Gross profit   $ 1.77 $1.78 $1.82 $1.90 $1.79
 EBITDA (4)   $1.11  (5) $1.14 $1.16 $1.08 $1.09
  

See Notes to Unaudited Operating Statistics



Selected Ratio Analysis
Table 2

As of
9/30/2004
 As of
6/30/2004
 As of
3/31/2004
 As of
12/31/2003
 As of
9/30/2003
Debt to EBITDA ratio (6)     0.8x   0.8x   1.2x   0.9x   0.9x  
EBITDA interest coverage (7)   11.9x  11.0x  12.1x  12.1x  11.0x 
Operating cash flow interest coverage (8)   10.6x  9.9x  10.6x  11.0x  9.4x 
Debt to capitalization (9)   25.7%  24.1%  32.1%  27.6%  27.9% 



Reconciliation of Operating Income and EBITDA (4) to
Adjusted Operating Income and Adjusted EBITDA
Table 3
3 months
ended
9/30/2004
 Operating income     $ 104,604  
 Add: charge for legal defense costs    25,000  
 Adjusted operating income   $ 129,604  
 EBITDA(4)   $ 122,256  
 Add: charge for legal defense costs    25,000  
 Adjusted EBITDA   $ 147,256  
  

The Company is using adjusted operating income and adjusted EBITDA in order to remove a large non-recurring charge in order to compare the underlying financial performance to prior periods.



Reconciliation of Fully Diluted Earnings Per Share (EPS)
to Adjusted Diluted EPS
Table 4
3 months
ended
9/30/2004
Reported diluted EPS     $ 0 .80    
Add: charge for legal defense costs    0 .20
Adjusted diluted EPS   $ 1 .00
2004 diluted EPS guidance:  
Reported range   $ 3 .57 $ 3 .59
Charges for early retirement of debt    0 .13  0 .13
Charge for legal defense costs    0 .20  0 .20
Contract termination payment    (0 .04)  (0 .04)
Adjusted diluted EPS guidance   $ 3.86 $ 3 .88

The Company is using adjusted EPS in providing earnings guidance to remove charges in order to compare the underlying financial

EXPRESS SCRIPTS, INC.

Notes to Unaudited Operating Statistics and Selected Ratio Analysis>
(in thousands)

    (1)        Network claims exclude drug formulary only claims where we only administer the clients formulary and approximately 0.5 million manual claims per quarter.

    (2)        Non-PBM claims represent the distribution of pharmaceuticals through Patient Assistance Programs and the distribution of pharmaceuticals where we have been selected by the pharmaceutical manufacturer as part of a limited distribution network.

    (3)        Adjusted claims represent network claims and specialty distribution claims plus mail claims, which are multiplied by 3, as mail claims are typically 90 day claims and network claims are generally 30 day claims.

    (4)        The following is a reconciliation of EBITDA to net income and to net cash provided by operating activities as the Company believes they are the most directly comparable measures calculated under Generally Accepted Accounting Principles:

3 months ended
September 30,
 9 months ended
September 30,
2004
 2003
 2004
 2003
Net income     $ 61,917   $ 64,542   $ 197,300   $ 182,169  
  Income taxes    38,352    39,839    122,266    113,054  
  Depreciation and amortization *    17,652    13,294    50,477    39,687  
  Interest expense, net    3,381    7,674    34,626    30,827  
  Undistributed loss from joint venture    954    1,436    3,754    4,520  
  Cumulative effect of accounting change, net of tax    --    --    --    1,028  
EBITDA    122,256    126,785    408,423    371,285  
  Current income taxes    (22,596 )  (23,752 )  (91,086 )  (78,858 )
  Interest expense less amortization    (3,124 )  (7,288 )  (27,271 )  (28,208 )
  Undistributed loss from joint venture    (954 )  (1,436 )  (3,754 )  (4,520 )
  Other adjustments to reconcile net income  
    to net cash provided by operating activities    54,383    66,489    16,964    21,697  
Net cash provided by operating activities   $ 149,965   $ 160,798   $ 303,276   $ 281,396  

EBITDA is earnings before other income (expense), interest, taxes, depreciation and amortization, or operating income plus depreciation and amortization. EBITDA is presented because it is a widely accepted indicator of a company’s ability to service indebtedness and is frequently used to evaluate a company’s performance. EBITDA, however, should not be considered as an alternative to net income, as a measure of operating performance, as an alternative to cash flow, as a measure of liquidity or as a substitute for any other measure computed in accordance with accounting principles generally accepted in the United States. In addition, our definition and calculation of EBITDA may not be comparable to that used by other companies.

* Includes depreciation and amortization expense of:                    
          Gross profit   $ 7,176   $ 5,145   $ 20,017   $ 15,556  
          Selling, general and administrative    10,476    8,149    30,460    24,131  
    $ 17,652   $ 13,294   $ 50,477   $ 39,687  

    (5)        Reflects adjusted EBITDA, which excludes the $25 million charge in the third quarter of 2004 for legal defense costs.

    (6)        Represents debt as of the balance sheet date divided by EBITDA for the twelve months ended.

    (7)        Represents EBITDA for the twelve months ended divided by interest for the twelve months ended.

    (8)        Represents Operating Cash Flow for the twelve months ended divided by interest for the twelve months ended. For the second quarter of 2004, this ratio was negatively impacted by a $12.3 million charge to interest expense related to the redemption of Senior Notes in June 2004. For the first quarter of 2004 this ratio was also negatively impacted by the charges to interest expense of $3.6 million, which pertains to the early retirement of debt.

    (9)        Represents debt divided by the total of debt and stockholders equity.

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Exhibit 99.2

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations

Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in thousands, except per share data) 2004
 2003
 2004
 2003
Revenues 1     $ 3,767,690   $ 3,248,602   $ 11,175,010   $ 9,806,780  
Cost of revenues 1    3,532,280    3,041,825    10,494,291    9,173,155  
   Gross profit    235,410    206,777    680,719    633,625  
Selling, general and administrative    130,806    93,286    322,773    302,027  
Operating income    104,604    113,491    357,946    331,598  
Other (expense) income:  
   Undistributed loss from joint venture    (954 )  (1,436 )  (3,754 )  (4,520 )
   Interest income    867    756    2,492    2,345  
   Interest expense    (4,248 )  (8,430 )  (37,118 )  (33,172 )
     (4,335 )  (9,110 )  (38,380 )  (35,347 )
Income before income taxes    100,269    104,381    319,566    296,251  
Provision for income taxes    38,352    39,839    122,266    113,054  
Income before cumulative effect of accounting change    61,917    64,542    197,300    183,197  
Cumulative effect of accounting change, net of tax    --    --    --    (1,028 )
Net income   $ 61,917   $ 64,542   $ 197,300   $ 182,169  

Basic earnings per share:		  
   Before cumulative effect of accounting change   $ 0.81   $ 0.82   $ 2.57   $ 2.34  
   Cumulative effect of accounting change    --    --    --    (0.01 )
   Net income   $ 0.81   $ 0.82   $ 2.57   $ 2.33  

Weighted average number of common shares		  
   Outstanding during the period - Basic EPS    76,126    78,666    76,902    78,197  
Diluted earnings per share:  
   Before cumulative effect of accounting change   $ 0.80   $ 0.81   $ 2.53   $ 2.30  
   Cumulative effect of accounting change    --    --    --    (0.01 )
   Net income   $ 0.80   $ 0.81   $ 2.53   $ 2.29  

Weighted average number of common shares		  
   Outstanding during the period - Diluted EPS    77,176    80,023    78,071    79,401  

1 Excludes estimated retail pharmacy co-payments of $1,363,991 and $1,326,022 for the three months ended September 30, 2004 and 2003, respectively, and $4,148,590 and $3,995,580 for the nine months ended September 30, 2004 and 2003, respectively. These are amounts we instructed retail pharmacies to collect from members. We have no information regarding actual co-payments collected.

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet

(in thousands, except share data) September 30,
2004
 December 31,
2003
Assets            
Current assets:  
   Cash and cash equivalents   $ 161,161   $ 396,040  
   Receivables, net    1,073,726    1,011,154  
   Inventories    151,581    116,375  
   Deferred taxes    18,424    15,346  
   Prepaid expenses and other current assets    23,610    21,220  
        Total current assets    1,428,502    1,560,135  
Property and equipment, net    177,764    177,312  
Goodwill, net    1,706,842    1,421,493  
Other intangible assets, net    244,630    232,059  
Other assets    34,837    18,175  
        Total assets   $ 3,592,575   $ 3,409,174  
Liabilities and Stockholders' Equity  
Current liabilities:  
   Claims and rebates payable   $ 1,178,120   $ 1,145,028  
   Accounts payable    306,547    265,875  
   Accrued expenses    218,540    216,505  
   Current maturities of long-term debt    22,056    --  
        Total current liabilities    1,725,263    1,626,408  
Long-term debt    417,607    455,018  
Other liabilities    176,824    133,755  
        Total liabilities    2,319,694    2,215,181  
Stockholders' equity:  
   Preferred stock, $0.01 par value per share, 5,000,000 shares authorized,  
      and no shares issued and outstanding    --    --  
   Common Stock, $0.01 par value per share, 275,000,000 and 181,000,000  
      shares authorized, respectively, and 79,770,000 and 79,795,000 shares  
      issued and outstanding, respectively    797    798  
   Additional paid-in capital    468,635    484,663  
   Unearned compensation under employee compensation plans    (22,051 )  (23,302 )
   Accumulated other comprehensive income    5,975    3,638  
   Retained earnings    1,061,850    864,550  
     1,515,206    1,330,347  
   Common Stock in treasury at cost, 3,786,000 and 2,223,000  
      shares, respectively    (242,325 )  (136,354 )
        Total stockholders' equity    1,272,881    1,193,993  
        Total liabilities and stockholders' equity   $ 3,592,575   $ 3,409,174  

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Cash Flows

Nine Months Ended
September 30,
(in thousands) 2004
 2003
Cash flows from operating activities:            
   Net income   $ 197,300   $ 182,169  
   Adjustments to reconcile net income to net cash  
      provided by operating activities, excluding  
      the effect of the acquisition:  
        Depreciation and amortization    50,477    39,687  
        Non-cash adjustments to net income    57,081    65,548  
        Net changes in operating assets and liabilities    (1,582 )  (6,008 )
Net cash provided by operating activities    303,276    281,396  
Cash flows from investing activities:  
   Purchases of property and equipment    (33,387 )  (32,012 )
   Acquisition, net of cash acquired, and investment in joint venture    (331,136 )  3,560  
   Loan to Pharmacy Care Alliance    (14,050 )  --  
   Other    103    15  
Net cash used in investing activities    (378,470 )  (28,437 )
Cash flows from financing activities:  
   Proceeds from long-term debt    675,564    50,000  
   Repayment of long-term debt    (740,455 )  (160,430 )
   Proceeds from revolving credit line, net    50,000    --  
   Treasury stock acquired    (160,286 )  (79,073 )
   Deferred financing fees    (6,036 )  --  
   Net proceeds from employee stock plans    21,256    35,908  
Net cash used in financing activities    (159,957 )  (153,595 )
Effect of foreign currency translation adjustment    272    2,292  
Net (decrease) increase in cash and cash equivalents    (234,879 )  101,656  
Cash and cash equivalents at beginning of period    396,040    190,654  
Cash and cash equivalents at end of period   $ 161,161   $ 292,310  

See accompanying Notes to Unaudited Consolidated Financial Statements

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