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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 June 30, 1996
[ ] 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.)
14000 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 report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Common stock outstanding as of July 15, 1996: 7,510,000 Shares Class B
8,955,770 Shares Class A
1
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<PAGE>
EXPRESS SCRIPTS, INC.
INDEX
PAGE NUMBER
Part I Financial Information 3
Item 1 Financial Statements
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 9
Part II Other Information
Item 1. Legal Proceedings - (Not Applicable)
Item 2. Changes in Securities - (Not Applicable)
Item 3. Defaults Upon Senior Securities - (Not Applicable)
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Materially Important Events - (Not Applicable)
Item 6. Exhibits 16
Signatures 17
Index to Exhibits 18
2
<PAGE>
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
EXPRESS SCRIPTS, INC.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................................. $ 9,490 $ 11,506
Short term investments ................................................ 53,441 --
Receivables, less allowance for doubtful
accounts of $1,886 and $2,274 respectively
Unrelated Parties ............................................... 130,145 108,525
Related Parties ................................................. 11,485 8,447
Inventories ........................................................... 19,481 13,853
Deferred taxes and prepaid expenses ................................... 1,911 2,084
--------- ---------
Total current assets ............................................... 225,953 144,415
Property and equipment, less accumulated depreciation and amortization ... 19,630 16,912
Other assets, net ........................................................ 14,123 2,761
--------- ---------
Total assets ....................................................... $ 259,706 $ 164,088
========= =========
Liabilities and Stockholders' Equity Current liabilities:
Claims payable ........................................................ $ 75,331 $ 60,915
Accounts payable ...................................................... 11,984 12,963
Accrued expenses ...................................................... 16,477 11,884
--------- ---------
Total current liabilities .......................................... 103,792 85,762
--------- ---------
Deferred rents and taxes .............................................. 1,114 947
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, and
no shares issued and outstanding
Class A Common Stock, $.01 par value, 30,000,000 shares authorized,
8,956,000 and 4,539,000 shares issued and outstanding, respectively 89 45
Class B Common Stock, $.01 par value, 22,000,000 shares authorized,
7,510,000 and 10,500,000 shares issued and outstanding, respectively 75 105
Additional paid-in capital ............................................. 98,614 33,158
Foreign currency translation adjustments ............................... (32) --
Retained earnings ..................................................... 56,054 44,071
--------- ---------
Total stockholders' equity ......................................... 154,800 77,379
========= =========
Total liabilities and stockholders' equity ......................... $ 259,706 $ 164,088
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
EXPRESS SCRIPTS, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------------
1996 1995 1996 1995
-------------- --------------------------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues $184,724 $135,154 $353,113 $253,184
-------------- ------------- -------------- ------------------
Cost and expenses:
Cost of revenues 162,797 118,540 311,782 220,760
Selling, general & administrative 12,255 9,386 22,642 18,369
-------------- -------------
-------------- ------------------
175,052 127,926 334,424 239,129
-------------- -------------
-------------- ------------------
Operating income 9,672 7,228 18,689 14,055
-------------- ------------- -------------- ------------------
Other income (expense):
Interest income 905 196 1,140 365
Interest expense (13) (34) (26) (69)
-------------- ------------- -------------- ------------------
892 162 1,114 296
-------------- -------------
-------------- ------------------
Income before income taxes 10,564 7,390 19,803 14,351
Provision for income taxes 4,161 2,864 7,820 5,560
-------------- -------------
============== ==================
Net income $6,403 $4,526 $11,983 $8,791
============== ============= ============== ==================
Primary earnings per share $0.39 $0.30 $0.75 $0.58
============== ============= ============== ==================
Weighted average number of common
shares outstanding during the period 16,569 15,228 16,026 15,235
============== ============= ============== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
EXPRESS SCRIPTS, INC.
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Numbers of Shares Amount
----------------------- -----------------------------------------------------------------------
Foreign
Class A Class B Class A Class B Additional currency
Common Common Common Common paid-in translation Retained
Stock Stock Stock Stock capital adjustments Earnings
--------- --------- ---------- ----------- ---------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 4,539 10,500 $45 $105 $33,158 $0 $44,071
December 31, 1995
Net income for ---- ---- ---- ---- ---- ---- 11,983
six months ended
June 30, 1996
Foreign currency ---- ---- ---- ---- ---- (32) ----
translation
adjustments
Tax benefit ---- ---- ---- ---- 496 ---- ----
relating to
employee stock
options
Exercise of 50 ---- ---- ---- 1,129 ---- ----
stock options
Conversion from 2,990 (2,990) 30 (30) ---- ---- ----
Class B
to Class A
Stock offering 1,150 ---- 12 ---- 52,583 ---- ----
Issuance of 227 ---- 2 ---- 11,248 ---- ----
common stock to
Premier
--------- --------- ---------- ----------- ---------- ------------ -----------
Balance at June 8,956 7,510 $89 $75 $98,614 ($32) $56,054
30, 1996
========= ========= ========== =========== ========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
EXPRESS SCRIPTS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------------------------
1996 1995
------------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income $11,983 $8,791
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,974 2,044
Tax benefit relating to employee stock options 496 ----
Changes in operating assets and liabilities:
Receivables (24,658) (17,904)
Inventories (5,628) (2,662)
Prepaids expenses and other assets (344) 177
Claims payable 14,416 15,236
Accounts payable and accrued expenses 3,781 (367)
------------------- -----------------
Net cash provided by operating activities 3,020 5,315
------------------- -----------------
Cash flows from investing activities:
Short term investments (53,441) ----
Purchases of property and equipment (5,287) (4,010)
------------------- -----------------
Net cash (used in) investing activities (58,728) (4,010)
------------------- -----------------
Cash flows from financing activities:
Proceeds from stock offerings 52,595 ----
Exercise of stock options 1,129 357
------------------- -----------------
Net cash provided by financing activities 53,724 357
------------------- -----------------
Effect of foreign currency translation adjustments (32) ----
------------------- -----------------
Net increase (decrease) in cash and cash equivalents (2,016) 1,662
Cash and cash equivalents at beginning of period 11,506 5,742
------------------- -----------------
Cash and cash equivalents at end of period $9,490 $7,404
=================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
EXPRESS SCRIPTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT 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 the opinion of the Company, 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 as incorporated by reference in the Company's Annual Report
on Form 10-K for the Year ended December 31, 1995, dated March 18, 1996, as
filed with the Securities and Exchange Commission.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Consolidated Balance Sheet at June
30, 1996, the Consolidated Statement of Operations for the three months ended
June 30, 1996, and 1995, and for the six months ended June 30, 1996, and 1995,
the Consolidated Statement of Changes in Stockholders' Equity for the six months
ended June 30, 1996, and the Consolidated Statement of Cash Flows for the six
months ended June 30, 1996, and 1995.
NOTE 2 - PRIMARY EARNINGS PER SHARE
Primary earnings per share are computed by dividing net income by the weighted
average number of shares of common stock outstanding and common stock
equivalents. Common stock equivalents include shares issuable upon the assumed
exercise of all stock options having an exercise price less than the average
market price of the common stock using the treasury stock method.
NOTE 3 - STOCK OFFERING
In April 1996, the Company completed the issuance of 1,150,000 shares of Class A
Common Stock and received net proceeds of $52,595,000 after deducting expenses
incurred in connection with the stock offering. The funds will be used for
general corporate purposes.
As a part of the stock offering, NYLIFE HealthCare Management, Inc. converted
2,990,000 shares of Class B Common Stock to Class A Common Stock and sold those
shares in same stock offering. The Company did not receive any proceeds from the
sale of these shares.
NOTE 4 - CONTRACTUAL AGREEMENTS
Effective April 24, 1996 the Company issued 227,273 shares of Class A Common
Stock to a group purchasing organization affiliated with Premier, Inc., an
alliance of integrated health care systems, in accordance with an agreement
dated December 31, 1995. These shares were valued at the fair market value at
April 24 of $11,250,000 and will be amortized over the remaining life of the
agreement. The shares are unregistered and cannot be traded until they have been
registered under the Securities Act of 1933 and any applicable state securities
laws, or unless an exemption from such registration is available.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS QUARTERLY
REPORT ON FORM 10-Q, AND INFORMATION THAT MAY BE CONTAINED IN OTHER FILINGS BY
THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") AND
RELEASES ISSUED OR STATEMENTS MADE BY THE COMPANY, CONTAINS OR MAY CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE PROJECTED OR SUGGESTED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE TO OCCUR
INCLUDE, BUT ARE NOT LIMITED TO, HEIGHTENED COMPETITION, INCLUDING INCREASED
PRICE COMPETITION IN THE PHARMACY BENEFIT MANAGEMENT MARKET; THE POSSIBLE
TERMINATION OF THE COMPANY'S CONTRACTS WITH CERTAIN KEY CLIENTS; CHANGES IN
PRICING OR DISCOUNT PRACTICES OF PHARMACEUTICAL MANUFACTURERS; ADVERSE RESULTS
IN CERTAIN LITIGATION AND REGULATORY MATTERS; AND THE ADOPTION OF ADVERSE
LEGISLATION OR REGULATIONS OR A CHANGE IN THE INTERPRETATION OF EXISTING
LEGISLATION OR REGULATIONS, AS WELL AS OTHER RISKS DESCRIBED FROM TIME TO TIME
IN THE COMPANY'S FILINGS WITH THE COMMISSION.
COMPANY OVERVIEW
The Company derives its revenues from the sale of network pharmacy
services through its nationwide networks of retail pharmacies and from the sale
of pharmaceuticals by its mail pharmacies and infusion therapy pharmacies to
members of health benefit plans sponsored by the Company's clients. Net revenue
of the Company includes the ingredient cost of pharmaceuticals dispensed by the
mail pharmacies and pharmacies in the networks, except where the Company's mail
service pharmacies dispense pharmaceuticals supplied by the Company's clients,
or where the Company merely administers contracts for the client's pharmacy
network. In these situations, the Company records only dispensing and
administrative fees as net revenue. The Company's vision care program derives
its revenues from administrative fees and from the sale of eyeglasses and
contact lenses to members. The Company also derives revenue from medical
information management services, including disease management support services
and provider profiling services.
RESULTS OF OPERATIONS
The following table sets forth certain financial data of the Company
for the periods presented as a percentage of net revenue and the percentage
change in the dollar amounts of such financial data for the three months ended
June 30, 1996 compared to 1995, and the six months ended June 30, 1996 compared
to 1995.
8
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES PERCENTAGE INCREASE
Three Months Ended Six Months Ended Three Months Six Months
June 30 June 30 June 30, 1996 June 30, 1996
1996 1995 1996 1995 Over 1995 Over 1995
------------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Unrelated clients 80.0% 80.4% 80.1% 79.4% 36.0% 40.6%
Related clients* 20.0 19.6 19.9 20.6 39.6% 35.0%
-------------- ------------ ------------- ------------
Total net revenues 100.0% 100.0% 100.0% 100.0% 36.7% 39.5%
============= ============ ============= ============
Costs and expenses:
Cost of revenues 88.1% 87.7% 88.3% 87.2% 37.3% 41.2%
Selling, general & administrative 6.6 6.9 6.4 7.2 30.6% 23.3%
------------- ------------ ------------- -------------
94.7 94.6 94.7 94.4 36.8% 39.9%
------------- ------------ ------------- -------------
Operating income 5.3% 5.4% 5.3% 5.6% 33.8% 33.0%
Other income, net 0.5% 0.1% 0.3% 0.1% 450. 6% 276.4%
Income before taxes 5.8 5.5 5.6 5.7 42.9% 38.0%
Provision for income taxes 2.3 2.2 2.2 2.2 45.3% 40.6%
------------- ------------ ------------- -------------
Net income 3.5% 3.3% 3.4% 3.5% 41.5% 36.3%
============= ============ ============= =============
</TABLE>
*Related clients consist of NYLCare Health Plans, Inc. ("NYLCare") and
New York Life Insurance Company.
9
<PAGE>
SECOND QUARTER ENDED JUNE 30, 1996, COMPARED TO 1995
NET REVENUES. Net revenues for the second quarter of 1996 increased
$49,570,000, or 36.7%, compared to the second quarter of 1995. Net revenues from
the Company's claims processing services and mail pharmacy services increased
35.6% in 1996, compared to 1995. The primary reason for this increase was a
$33,349,000, or 37.2%, increase in revenues from pharmacy claims processed
reflecting a 33.2% increase in the number of claims processed, and a 3.1%
increase in average revenue per claim compared to 1995. Revenue from the
Company's mail pharmacy services increased $13,041,000, or 32.0%, reflecting a
21.7% increase in the number of prescriptions dispensed, and an 8.5% increase in
the average revenue per prescription dispensed. The increase in average revenue
per claim and per prescription dispensed is primarily due to increases in the
ingredient costs of drugs for customers utilizing the Company's pharmacy
networks and mail pharmacy services, partially offset by lower pricing offered
by the Company due to continued competitive pressures.
The increase in the number of claims processed and the number of mail
service pharmacy prescriptions dispensed reflects a 20.0% increase in the
average number of members served from approximately 7.5 million members served
during the second quarter of 1995 to an average of almost 9.0 million members
served during the second quarter of 1996. The percentage increase in claims
processing revenue continues to exceed the percentage increase in mail service
revenues, as the price difference between mail pharmacy prescriptions and
network pharmacy prescriptions decreases. Net revenues from the Company's vision
and infusion therapy services increased 56.2%, compared to 1995, primarily as a
result of the growth in the number of members who receive these services.
COST OF REVENUES. Cost of revenues for the second quarter of 1996
increased $44,257,000, or 37.3%, compared to the second quarter of 1995. The
percentage increase in cost of revenues was 0.6 percentage points greater than
the increase in revenues, thus gross profit margins decreased. The main reason
for the percentage increase in the cost of revenues was the lower mail pharmacy
gross margins as a result of competitive pressures. For claims processing
services, the cost of revenue as a percentage of net revenues increased
slightly. The increase in the cost of revenues for mail order and claims
processing were both partially offset by economies of scale in direct processing
costs and by an increase as a percentage of net revenues in the fees received
from drug manufacturers in connection with the Company's drug purchasing and
formulary management programs. The cost of revenue for vision and infusion
therapy services increased 48.8%, principally due to the cost of providing
services to new members.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased $2,869,000, or 30.6%, for the second quarter
of 1996, compared to 1995. The primary reason for the increase was the
additional expenditures incurred to market the Company's products and services,
together with increases in expenses for additional clinical programs to enhance
management of the pharmacy benefit. The Company is continuing its commitment to
expand its capability to provide for future growth and enhance the level of
service for its members. However, in spite of the increase, selling, general and
administrative expenses as a percent of net revenues decreased from 6.9% in the
second quarter of 1995 to 6.6% in the comparable quarter of 1996 reflecting
overall economies of scale in this area.
OTHER INCOME, NET. Other income, net was $892,000 for the second
quarter of 1996 compared to $162,000 for 1995, partially as a result of higher
interest rates but primarily due to higher invested cash balances in 1996,
principally from the proceeds of the stock offering completed in April 1996. In
addition, the Company had no borrowings in the second quarter of 1996, and
consequently, there was no interest expense related to any borrowings in 1996,
in contrast to the second quarter of 1995.
PROVISION FOR INCOME TAXES. The provision for income taxes for the
quarter ended June 30, 1996, was $4,161,000, compared to $2,864,000 in the prior
year. The effective tax rate was 39.4% in 1996 compared to 38.8% for 1995.
NET INCOME. As a result of the foregoing, net income for the second
quarter ended June 30, 1996, increased $1,877,000, or 41.5%, compared to 1995.
SIX MONTHS ENDED JUNE 30, 1996, COMPARED TO 1995
NET REVENUES. Net revenues increased $99,929,000, or 39.5%, for the six
months ended June 30, 1996 compared to the prior period. Net revenues from the
Company's claims processing services and mail pharmacy services increased 38.7%
in 1996, compared to 1995. The primary reason for this increase was a
$67,296,000, or 40.7%, increase in revenues from pharmacy claims processed
reflecting a 37.9% increase in the number of claims processed, and a 2.0%
increase in average revenue per claim compared to 1995. Revenue from the
Company's mail pharmacy services increased $26,974,000, or 34.5%, reflecting a
25.4% increase in the number of prescriptions dispensed, and a 7.2% increase in
the average revenue per prescription dispensed. The increase in average revenue
per claim and per prescription dispensed is primarily due to increases in drug
costs for customers utilizing the Company's pharmacy networks and mail pharmacy
services, partially offset by lower prices resulting from continued competitive
pressures. Net revenues from the Company's vision and infusion therapy services
increased 50.1%, compared to 1995, primarily as a result of the growth in the
number of members who receive those services.
COST OF REVENUES. For the six months ended June 30, 1996, the cost of
revenues increased $91,022,000, or 41.2%, compared to the prior period. The
percentage increase in cost of revenues was 1.7 percentage points greater than
the increase in net revenues, thus gross profit percentage decreased. As with
the second quarter of 1996, the main reason for the percentage increase in the
year to date cost of revenues was the lower mail pharmacy gross margins as a
result of competitive pressures. For claims processing services, the cost of
revenue as a percentage of net revenues increased slightly. The increase in cost
of revenue for mail pharmacy and claims processing were both partially offset by
economies of scale in direct processing costs and by an increase in the fees
received from drug manufacturers as a percentage of net revenues in connection
with the Company's drug purchasing and formulary management programs. The cost
of revenue for vision and infusion therapy services increased 52.1%, principally
due to costs related to the continued expansion of vision and infusion therapy
service operations.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased $4,273,000, or 23.3%, for the first six months
of 1996 compared to 1995. The primary reason for the increase was the additional
expenditures incurred to market the Company's products and services, together
with increases in expenses for information systems and additional clinical
programs to enhance management of the pharmacy benefit. The Company is
continuing its commitment to expand its capability to provide for future growth
and enhance the level of service for its members. However, in spite of these
increases, selling, general and administrative expenses as a percent of net
revenues decreased from 7.3% in the first six months of 1995 to 6.4% in the
comparable period of 1996 reflecting overall economies of scale in this area.
OTHER INCOME, NET. Other income, net was $1,114,000 for the first six
months of 1996 compared to $296,000 for 1995, partially as a result of higher
interest rates but primarily due to higher invested cash balances in 1996,
principally from the proceeds of the stock offering completed in April 1996. In
addition, the Company had no borrowings in the first half of 1996, and
consequently, there was no interest expense related to any borrowings in 1996,
in contrast to the first six months of 1995.
PROVISION FOR INCOME TAXES. The provision for income taxes for the six
months ended June 30, 1996, was $7,820,000 compared to $5,560,000 in the prior
year. The effective tax rate was 39.5% in 1996 compared to 38.7% for 1995.
NET INCOME. As a result of the foregoing, net income for the six
months ended June 30, 1996, increased $3,192,000, or 36.3%, compared to 1995.
LIQUIDITY AND CAPITAL RESOURCES. The Company added approximately 1.1
million lives during the first six months of 1996, reaching a total of almost
9.2 million members utilizing the Company's services at June 30, 1996. As in the
past, the growth in new members served during the first six months resulted in a
significant growth in receivables. In the first six months of 1996, receivables
increased $24,658,000. This increase was primarily financed by an increase in
current liabilities of $18,030,000. Management expects to continue to fund a
substantial portion of its future anticipated capital expenditures and net
increases in non-cash working capital with operating cash flow, and will also
have available bank loans and the proceeds from the sale of shares of the
Company's Class A Common Stock by the Company in a public offering during the
second quarter of 1996.
The Company maintains a $25 million line of credit with the Mercantile
Bank of St. Louis, N.A. ("Mercantile") which the Company has extended to
May 29, 1997. The Company also has a $25 million one-year line of credit with
the First National Bank of Chicago expiring October 31, 1996, with the same
terms and conditions as the existing line with Mercantile. At June 30, 1996,
there were no borrowings outstanding on either of these lines of credit.
The Company has reviewed and currently intends to review potential
acquisitions and affiliation opportunities. The Company believes that available
cash resources including the proceeds of the offering of the Company's common
stock referred to below, bank financings and the issuance of additional common
stock would be used to finance such acquisitions or affiliations.
There can be no assurance the Company will make an acquisition or affiliation in
1996.
OTHER MATTERS. In April 1996, the Company issued 1,150,000 shares of
Class A Common Stock and received net proceeds of $52,595,000 after deducting
expenses of the stock offering. The funds will be used for general corporate
purposes. As part of the stock offering, NYLIFE HealthCare Management, Inc.
converted 2,990,000 shares of Class B Common Stock to Class A Common Stock and
sold those shares. The Company did not receive any proceeds from the sale of
these shares.
Effective April 24, 1996, the Company issued 227,273 shares of Class A
Common Stock valued at the fair market value on that date of $11,250,000 to a
group purchasing organization affiliated with Premier, Inc., an alliance of
integrated health care systems in accordance with the agreement between the
parties. The value of this stock is being amortized over the remaining term of
the agreement with Premier.
In June, the Company announced it had entered into a strategic eyecare
management alliance with Omega Health Systems' wholly-owned subsidiary, the
Eye Health Network ("EHN"). By working together, EHN and the Company intend
to provide integrated eyecare delivery systems, to unify routine vision care,
eyeware, optical laboratory medical/surgical eyecare, outpatient opthalmological
surgical facilities and disease management services. Under the terms of the
agreement, EHN and the Company will jointly market eyecare networks and other
managed eyecare services to managed care organizations and other third party
payors. The Company has formed a separate subsidiary, PhyNet, Inc., to manage
the joint vision care benefit by providing sophisticated management information
systems, disease state management and provider profiling services. The alliance
will initially cover approximately 2 million of the 3 million combined eyecare
lives under contract with the Company and EHN and provide service through
networks comprising a combined total of more than 4,000 opthalmologists and
13,000 optometrists.
On August 5, 1996, PacifiCare Health Systems, Inc. ("PacifiCare")
announced that it had entered into an agreement to acquire FHP International,
Inc. ("FHP"). Currently, the Company has a contract with FHP to provide pharmacy
benefit services to FHP's 1.9 million members through December 31, 1997.
While FHP is the Company's largest single client in terms of membership, its
contribution to the Company's net revenues is less than 2% due to the fact that
the Company only records the fees related to administering FHP's network
prescriptions and dispensing mail pharmacy prescriptions. While the earnings
attributable to the Company's contract with FHP are presently material to
reported financial results, its contribution to earnings is substantially less
than the relationship to membership. The Company does not provide pharmacy
benefit management ("PBM") services to PacifiCare.
The Company has received notice from New York Life Insurance Company
("New York Life") that New York Life will exercise its option to renegotiate
pricing under its agreement with the Company whereby the Company provides
non-exclusive pharmacy benefit management services to certain group indemnity
policyholders of New York Life and certain contract holders whose health benefit
plans provide indemnity style benefits for which New York Life provides
administrative services only. The option to renegotiate pricing is a mutual,
annual option. The current term of the agreement expires on December 31, 1999,
subject to certain early termination rights of both parties relating to the
inability of the parties to agree in connection with the option to renegotiate
pricing. In connection with the renegotiation, New York Life and its subsidiary,
NYLCare Health Plans, Inc. ("NYLCare") have indicated a desire to expand their
relationship with the Company on their indemnity business and health maintenance
organization ("HMO") business to include a potential expansion of the medical
information management and other services offered by the Company. The
renegotiation should not adversely affect the Company's agreement
with NYLCare relating to pricing for the HMO's owned or managed
by NYLCare.
IMPACT OF INFLATION. Changes in prices charged by manufacturers and
wholesalers for pharmaceuticals affect the Company's net revenue and cost of
revenues. To date the Company has been able to recover price increases from its
clients under the terms of its agreements. As a result, changes in
pharmaceutical prices have not adversely affected the Company.
10
<PAGE>
- -------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders was held on May 22, 1996.
(b) The following persons were elected directors of the Company to
serve until the next Annual Meeting of Stockholders and until
their respective successors are elected and qualified:
Bernard N. Del Bello
Lee M. Gammill, Jr.
Richard M. Kernan, Jr.
Richard A. Norling
Frederick J. Sievert
Stephen N. Steinig
Seymour Sternberg
Barrett A. Toan
Howard L. Waltman
Norman Zachary
(c) The stockholder vote for each director was as follows:
Votes Votes
Cast For Withheld
------------ -----------
Bernard N. Del Bello 108,891,944 58,785
Lee M. Gammill, Jr. 108,153,816 796,913
Richard M. Kernan, Jr. 108,889,544 61,185
Richard A. Norling 108,892,294 58,435
Frederick J. Sievert 108,889,244 61,485
Stephen N. Steinig 108,889,244 61,485
Seymour Sternberg 108,892,394 58,335
Barrett A. Toan 108,891,944 58,785
Howard L. Waltman 108,889,544 61,185
Norman Zachary 108,890,851 59,878
The stockholders also voted to:
(1) Ratify the appointment of Price Waterhouse as the
Company's independent accountants for the Company's
current fiscal year (109,268,684 affirmative votes;
1,631 negative votes; 4,128 abstention votes);
(2) Approve the First Amendment to the Company's Amended
and Restated 1992 Stock Option Plan for Outside
Directors (109,029,263 affirmative votes; 206,856
negative votes; 12,747 abstention votes).
Item 6. EXHIBITS
See Index to Exhibits on page 18.
11
<PAGE>
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: August __, 1996 By: BARRETT A. TOAN
-------------------
Barrett A. Toan, President and
Chief Executive Officer
Date: August __, 1996 By: KURT D. BLUMENTHAL
----------------------
Kurt D. Blumenthal, Vice
President and Acting Chief
Financial Officer
12
<PAGE>
INDEX TO EXHIBITS
Exhibit
NUMBER EXHIBIT
3.1 Certificate of Incorporation, incorporated by reference to
Exhibit No. 3.1 to the Company's Registration Statement on
Form S-1 filed June 9, 1992 (No. 33-46974) (the "Registration
Statement").
3.2 Certificate of Amendment of the Certificate of Incorporation
of the Company, incorporated by reference to Exhibit No. 10.6
to the Company's Quarterly Report on Form 10-Q for the
quarter ending June 30, 1994.
3.3 Second Amended and Restated By-Laws, incorporated by
reference to Exhibit No. 3.2 to the Company's Annual Report
on Form 10-K for the year ending 1993.
10.1 Third Amendment to Revolving Loan Agreement made as of May
29, 1996, by and between the Company and Mercantile Bank of
St. Louis National Association.
10.2 Release of Guaranty of NYLIFE HealthCare Management, Inc.,
Guarantor of the Company's Obligations under its Lease with
Riverport, Inc. and Douglas Development Company, dated May 8,
1996.
10.3 Release of Guaranty of NYLIFE HealthCare Management, Inc.,
Guarantor of the Company's Obligations under its Lease with
Kenneth H. Dart, Trustee of Trust B of Dart Family Revocable
Estate Trust, dated June 21, 1996.
10.4 * First Amendment to Express Scripts, Inc. Amended and Restated
1992 Stock Option Plan for Outside Directors incorporated by
reference to Exhibit A to the Company's Proxy Statement dated
April 9, 1996 (File No. 0-20199).
27.1 Financial Data Schedule (provided for the information of the
U.S. Securities and Exchange Commission only)
*Management contract or compensatory plan or arrangement.
13
THIRD AMENDMENT TO REVOLVING LOAN AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING LOAN AGREEMENT (this "Agreement") is
made as of May 29, 1996, by and between EXPRESS SCRIPTS, INC., a Delaware
Corporation ("Borrower"), and MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION
("Bank").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Revolving Loan Agreement executed by
Borrower in favor of Bank on May 21, 1993, as amended by the certain Amendment
to Revolving Loan Agreement dated as of May 31, 1994 and by the certain Second
Amendment to Revolving Loan Agreement dated as of May 30, 1995 (as amended, the
"Loan Agreement"), Borrower executed a certain Promissory Note payable to Bank
dated May 30, 1995, in the original principal amount of $25,000,000.00 (the
"Note"); and
WHEREAS, Borrower desires to further amend the terms of the Loan
Agreement in the manner set forth herein and Bank is willing to agree to said
amendment on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Bank hereby agree as follows:
1. The definition of "Note" in Section 1.1(L) of the Loan Agreement is
deleted in its entirety and substituted with the following:
"(L) "NOTE": the Promissory Note dated May 29, 1996, in the principal
amount of $25,000,000.00, executed and delivered by Borrower to Bank in
evidence of the Credit (as defined in Section 2.1)."
Borrower shall execute a Promissory Note dated May 29, 1996, which shall have a
maturity date of May 28, 1997, and which shall be subject to the payment terms
described therein.
2. The definition of "Termination Date" in Section 1.1(N) of the Loan
Agreement is deleted in its entirety and substituted with the following:
"(N) TERMINATION DATE": May 28, 1997, or such later date to which it may be
extended pursuant to Section 7.12."
3. Section 2.1(A)(ii) of the Addendum to Loan Agreement (Financial
Covenants) dated as of May 21, 1993, is deleted in its entirety and substituted
with the following:
"(ii) Consolidated Tangible Net Worth in the amount of at least
$100,000,000.00 on a quarterly basis; and"
4. The Loan Agreement is, and shall remain, the binding obligation of
Borrower, and all of the provisions, terms, stipulations, conditions, covenants
and powers contained therein shall stand and remain in full force and effect,
except only as the same are herein and hereby expressly and specifically varied
or amended, and the same are hereby ratified and confirmed, and Bank reserves
unto itself all rights and privileges granted thereunder.
5. Borrower hereby reaffirms all representations, warranties, covenants
and agreements recited in the Loan Agreement as of the date hereof, and the same
are hereby adopted as representations, warranties, covenants and agreements of
Borrower herein. Borrower further represents and warrants that it is not in
default under any of its obligations under the Loan Agreement and that it has
full power and authority to execute and deliver this Amendment, and that the
execution and delivery hereof has been duly authorized, and that all necessary
and proper acts have been performed or taken.
6. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND BANK FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS BORROWER AND BANK REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN BORROWER AND BANK, EXCEPT AS
BORROWER AND BANK MAY LATER AGREE IN WRITING TO MODIFY IT.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
BORROWER:
EXPRESS SCRIPTS, INC.
By: KURT D. BLUMENTHAL
Title: Vice President of Finance
BANK:
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By: MARY ANN LEMONDS
Title: Vice President
<PAGE>
PROMISSORY NOTE
$25,000,000.00 Date: May 29, 1996
FOR THE VALUE RECEIVED, the undersigned, EXPRESS SCRIPTS, INC., a
Delaware corporation ("Borrower") hereby unconditionally promises to pay, to the
order of MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION ("Bank") on May 28,
1997, the principal amount of Twenty-Five Million and 00/100 Dollars
($25,000,000.00) or, if less, the aggregate unpaid principal amount of all
advances made by Bank to borrower and evidenced by this Promissory Note
("Note"). The aggregate principal amount which Bank shall be committed to have
outstanding hereunder at any one time shall not exceed Twenty-Five Million and
00/100 Dollars ($25,000,000.00), which amount may be borrowed, paid, reborrowed
and repaid, in whole or in part. The initial advance, all subsequent advances
and all payments made on account of principal may be endorsed by the holder
hereof in its records or, at its option, on a schedule attached to this Note,
which in the absence of manifest error shall be evidence of the principal owing
and unpaid on this Note.
Borrower further promises to pay to the order of Bank interest on the
principal amount of each advance from time to time outstanding hereunder, at a
rate per annum equal to any of the following options which Borrower, at its
option, shall select at the time of each advance hereunder: (a) the interest
rate announced from time to time by Bank as its "prime rate" on commercial loans
(which rate shall fluctuate as and when said prime rate shall change) (the
"Prime Rate Option "); (b) the rate equal to .50% in excess of the rate
announced from time to time by Bank as its Cost of Funds Rate (which rate shall
fluctuate as and when said Cost of Funds Rate shall change)(the "Cost of Funds
Option"); or (c) a fixed rate equal to .50% in excess of the rate at which
dollar deposits in immediately available funds are offered or available to Bank
in the London Interbank Market for Eurodollars, for interest periods of 30, 60,
90 or 180 days (the "LIBOR Option").
After maturity, interest shall be payable on demand on the outstanding
principal balance at a rate equal to 2% per annum in excess of the otherwise
payable rate. In addition, if Borrower fails to make any payment of any
principal or interest on this Note when due, Borrower promises to pay to the
order of Bank on demand a late fee in an amount not to exceed the greater of
$15.00 or 5% of each late payment. All payments received by Bank shall be
applied first to the payment of billed/due and unpaid late fees and the costs
and expenses hereinafter described, next to billed/due and unpaid interest
hereon, and the remainder to principal. Interest shall be computed on the basis
of a year consisting of 360 days and paid for actual days elapsed.
All required payments shall be made in immediately available funds in
lawful money of the United States of America at the office of Bank situated at
One Mercantile Center, 7th and Washington Streets, St. Louis, Missouri
63101-1643, or at such other place as the holder may designate in writing. The
acceptance by the holder hereof of any principal or interest due after the date
it is due as described above shall not be held to establish a custom or waive
any rights of the holder to enforce prompt payment of any other principal or
interest payments or otherwise.
Bank may record the date and amount of all loans and all payments
hereunder in the records it maintains. Bank's books and records showing the
account between Bank and Borrower shall be conclusive evidence of the
outstanding amounts under this Note in the absence of manifest error.
This Note is referred to in that certain Revolving Loan Agreement dated
as of May 21, 1993, as amended, by and between Borrower and Bank to which
reference is made for a statement of additional terms and conditions, including
acceleration, which may affect this Note.
Borrower has the right to prepay any advances made under either the
Prime Rate Option, the Cost of Funds Option, or the LIBOR Option of this Note in
whole or in part at any time without penalty or premium, provided: (1) all
billed/due and unpaid interest shall accompany such prepayment; (2) there is not
a default under any of the terms of this Note at the time of prepayment; and (3)
all prepayments shall be credited and applied to the installments of principal
in inverse order of their stated maturity. In addition, for all prepayments of
advances made under the LIBOR Option prior to the expiration of an interest
period, if the current LIBOR rate is less than the LIBOR rate applicable to the
prepaid LIBOR advance, Borrower shall also pay to Bank a prepayment premium
equal to the sum of (1) the amount of principal of each LIBOR advance so
prepaid, each respectively multiplied by (2) a rate per annum equal to the
difference between the rate of interest applicable to the prepaid LIBOR advance
and the current LIBOR rate applicable to the remaining interest period. All
determinations, estimates, assumptions, allocations and like required for the
determination of such prepayment premiums shall be made by Bank in good faith
and Bank's determination shall be final, binding and conclusive upon Borrower.
Borrower agrees to pay to Bank, upon demand by Bank, all reasonable
costs, charges and expenses (including, without limitation the reasonable fees
and expenses of any attorney [including but not limited to, any attorney
employed by Bank or any affiliate of Bank] retained by Bank) incurred by Bank in
connection with (a) the collection or enforcement of Borrower's liabilities and
obligations under this Note, (b) the collection and enforcement of Bank's right
in and to any Collateral (hereinafter defined), and/or (c) any litigation,
contest, dispute or other proceeding (whether instituted by Bank, Borrower or
any other person or entity) in any way relating to Borrower's liabilities and
obligations hereunder and/or to the "Collateral". Borrower's obligations, as
aforesaid, shall survive payment of this Note. For purposes of this Note, the
term "affiliate of Bank" shall mean any entity which controls, is controlled by
or is under common control with Bank, including, without limitation, Mercantile
Bancorporation Inc. ("MBI") and any banking or non-banking subsidiary of MBI.
Presentment, demand for payment, protest and notice of dishonor and of
protest are hereby severally waived by all parties hereto, whether as maker,
endorser or guarantor to Bank.
The liabilities and obligations of Borrower under this Note shall be
secured by (a) any and all balances, credits, deposits or monies of or in the
name of Borrower now or hereafter maintained with, and any and all other
property of or in name of Borrower now or hereafter in the possession of Bank,
and (b) any and all of Bank's security interests, liens or encumbrances
heretofore, now and/or from time to time hereafter granted by Borrower and/or
endorser or guarantor to Bank (collectively the "Collateral"). In addition to
and not in limitation of all rights of offset that Bank may have under
applicable law, Bank shall have the right to appropriate and apply to the
payment of this Note any and all balances, credits, deposits, accounts or moneys
of the Borrower then or thereafter with Bank or other holder.
If any of the following events ("Events of Default") shall occur: (a)
the Borrower fails to make any payment on this Note when the same shall become
due and payable, whether under the terms of this Note or under any agreement,
instrument or document heretofore, now or at any time or times hereafter
delivered to Bank by Borrower; (b) a default or an event of default under any
agreement, instrument or document heretofore now or at any time or times
hereafter delivered to Bank by Borrower which is not cured within the time, if
any specified therefore in such agreement, instrument or document, then, and in
each such event, Bank or the holder of this Note may, at its option, declare the
entire outstanding principal amount of and all billed/due and unpaid interest on
this Note and all other amounts payable by the Borrower hereunder to be
forthwith due and payable, whereupon all of the unpaid principal amount,
billed/due and unpaid interest and all such other amounts shall become and be
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower,
and Bank or holder may exercise any and all other rights and remedies which it
may have under this Note or any other agreement, document or instrument
evidencing, securing or guaranteeing the payment of this Note or under
applicable law.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND BANK FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
This Note shall be governed by and construed in accordance with the laws
of the State of Missouri.
BORROWER:
EXPRESS SCRIPTS, INC.
By: KURT D. BLUMENTHAL
Title: Vice President of Finance
Address: 14000 Riverport Drive
Maryland Heights, MO 63043
May 8, 1996
Riverport, Inc., and Douglas Development Company -
Irvine Partnership in commendam
c/o Mr. Richard Feldman
Sverdrup Corporation
13723 Riverport Drive
Maryland Heights, Missouri 63043
Re: Release of Guaranty of NYLIFE HealthCare Management, Inc. of Express
Scripts, Inc. obligations under the Lease Agreement
Dear Mr. Feldman:
As you are aware, NYLIFE HealthCare Management, Inc. ("NYL") is the
Guarantor under a Guaranty Agreement, dated March 3, 1992 (as assignee of Sanus
Corp. Health Systems, Inc. pursuant to an Assignment of Guaranty Agreement dated
as of August 17, 1992), for the purpose of guaranteeing certain obligations of
Express Scripts, Inc. under its Lease Agreement with Riverport, Inc. and Douglas
Development Company - Irvine Partnership in commendam, dated March 3, 1992
("Lease").
Section 10 of the Guaranty Agreement provides for the release of the
Guaranty prior to the expiration of the term of the Lease if Express Scripts
achieves certain financial milestones defined therein, and the Guarantor
certifies to Express Scripts' current and future financial position. Express
Scripts has met the financial objectives required under Section 10 and,
therefore, NYL, as Guarantor, hereby requests release of its obligations under
the Guaranty Agreement.
Enclosed herewith is correspondence from Express Scripts' Associate
General Counsel providing the documentation required under Sections 10 (i) and
(ii) with respect to Express Scripts' financial milestones. NYL is providing the
following certification pursuant to the requirement of Section 10 (iii) of the
Guaranty Agreement:
The Guarantor, by signature below, states that as of this date, there
exists no ascertainable potential event or liability, to the best of
Guarantor's knowledge, which materially adversely affects Express Scripts'
current or future financial position.
Please indicate your acknowledgment to the release of the Guaranty
Agreement by providing the appropriate signature where indicated below on the
three copies enclosed. Please retain one copy for your files and return two
executed copies to Jennifer Goldberg Low, Express Scripts, Inc., 14000 Riverport
Drive, Maryland Heights, Missouri 63043.
Please let me know if you have any questions.
Very truly yours,
NYLIFE HealthCare Management, Inc.
By: MAUREEN MCGRATH
Maureen McGrath
Secretary
Riverport, Inc. and Douglas Development
Company - Irvine Partnership, in commendam
hereby acknowledges and agrees to the
release of NYLIFE HealthCare Management, Inc.
from the Guaranty Agreement dated
March 3, 1992.
RIVERPORT, INC. AND DOUGLAS DEVELOPMENT
COMPANY - IRVINE PARTNERSHIP, IN COMMENDAM
By: RICHARD E. FELDMAN
Title: V.P.
cc: Jennifer Goldberg Low
June 21, 1996
Mr. Carl J. Greenwood, Agent for
Kenneth H. Dart, Trustee of Trust B of The
Dart Family Revocable Estate Trust created
May 16, 1975
440 W. First St., Suite 201
Tustin, CA 92680
Re: Release of NYLIFE HealthCare Management, Inc., Guarantor of Express
Scripts, Inc. obligations under the Lease Agreement
Gentlemen:
As you are aware, NYLIFE HealthCare Management, Inc ("NYL") is the
Guarantor under a Guaranty Agreement, dated June 30, 1993 of NYL, for the
purpose of guaranteeing certain obligations of Express Scripts, Inc. Under its a
Single-Tenant Lease - Net Agreement with James M. Chamberlain, Trustee of the
Chamberlain Family Trust dated June 30, 1993 ("Lease"), said Lease having been
assigned to Kenneth H. Dart, Trustee of Trust B of the Dart Family Revocable
Estate Trust created May 16, 1975.
Section 13 of the Guaranty Agreement provides for the release of the
Guarantor from the Guaranty prior to the expiration of the term of the Lease if
Express Scripts achieves certain financial milestones defined therein, and the
Guarantor certifies to Express Scripts' current and future ability to satisfy
Express Scripts' obligations under the Lease. Express Scripts has met the
financial objectives required under Section 13 and, therefore, NYL, as
Guarantor, hereby requests release of its obligations under the Guaranty
Agreement.
Enclosed herewith is correspondence from Express Scripts' Associate
General Counsel providing the documentation required under Sections 13 (a) (i)
and (ii) with respect to Express Scripts' financial milestones. In addition, NYL
is providing the following certification pursuant to the requirement of Section
13 (b) of the Guaranty Agreement:
The Guarantor, by signature below, states that as of this date, there
exists no ascertainable potential event or liability, to the best of its
knowledge, which materially adversely affects Express Scripts' current or
future ability to satisfy Express Scripts' obligation under the Lease.
Please indicate your acknowledgment to the release of the Guaranty
Agreement by providing the appropriate signature where indicated below on the
three copies enclosed. Please retain one copy for your files and return two
executed copies to Jennifer Goldberg Low, Express Scripts, Inc., 14000 Riverport
Drive, Maryland Heights, Missouri 63043.
If you have any questions please contract Maureen McGrath, Esq. at
212)576-5718.
Very truly yours,
NYLIFE HealthCare Management, Inc.
By: CINDY CRAFT
Cindy E. Craft
Assistant Secretary
Kenneth H. Dart, Trustee of Trust B of The
Dart Family Revocable Estate Trust created
May 16, 1975 hereby acknowledges and
agrees to the release of NYLIFE HealthCare
Management, Inc. From the Guaranty Agreement
dated June 30, 1993.
KENNETH H. DART, TRUSTEE
By: KENNETH H. DART
Kenneth H. Dart, Trustee
cc: Jennifer Goldberg Low
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR EXPRESS SCRIPTS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
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<RECEIVABLES> 143516
<ALLOWANCES> 1886
<INVENTORY> 19481
<CURRENT-ASSETS> 225953
<PP&E> 31648
<DEPRECIATION> 12018
<TOTAL-ASSETS> 259706
<CURRENT-LIABILITIES> 103792
<BONDS> 0
0
0
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<OTHER-SE> 154636
<TOTAL-LIABILITY-AND-EQUITY> 259706
<SALES> 353113
<TOTAL-REVENUES> 353113
<CGS> 311782
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<OTHER-EXPENSES> 22642
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