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: October 21, 1998
Express Scripts, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Delaware 0-20199 43-1420563
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of corporation) Identification No.)
14000 Riverport Drive, Maryland Heights, Missouri 63043
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314) 770-1666
--------------------------
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On October 21, 1998, Express Scripts, Inc. issued a press release, a copy
of which is attached hereto as Exhibit 99.1, and incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) The following exhibit is filed as part of this report on Form 8-K:
Exhibit 99.1 Press release, dated October 21, 1998, by Express
Scripts, Inc.
<PAGE>
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: October 23, 1998 By: /s/ Barrett A. Toan
Barrett A. Toan
President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 Press release, dated October 21, 1998, by Express Scripts, Inc.
EXHIBIT 99.1
EXPRESS SCRIPTS REPORTS CONTINUED STRONG REVENUE
AND INCOME GROWTH
Net Income Increased 31 Percent In Third Quarter;
ValueRx Integration Continues On Track
ST. LOUIS, October 21, 1998--Express Scripts, Inc. (NASD: ESRX) today
reported net income grew by 31.2 percent to $11.3 million from $8.6 million in
the prior year, and rose 28.9 percent on a diluted per share basis, to 67 cents
from 52 cents. The company's third quarter 1998 revenue increased 152.3 percent
to $807.3 million compared with $319.9 million for the same period one year ago.
While contributions from the acquisition of ValueRx, completed April 1,
1998, were primarily responsible for the significant increase in revenues during
the third quarter of 1998, the company also experienced continued growth from
its existing base of business compared to the third quarter of 1997. The
operations of ValueRx also had a positive impact on operating income for the
quarter, although planned integration costs partially offset this operating
income.
"We were pleased to generate net income growth exceeding 30 percent in the
third quarter of 1998 over the same period last year," said Barrett Toan,
Express Scripts president and chief executive officer. "We are also pleased that
the integration of Express Scripts' and ValueRx's operations continues to move
forward following the plan we set forth in April. We have been successful in
achieving our integration goals while maintaining a non-dilutive earnings stream
and positive cash flow."
Net membership as of Oct. 1, 1998, is approximately 22.8 million members,
an increase of 100,000 members from the previous quarter end. As part of an
ongoing process to evaluate the profitability of its client base and improve
margins where appropriate, which was begun by ValueRx prior to the acquisition
and continued by the combined company after the effective date of the
acquisition, a number of clients with a total of 500,000 members have
terminated. Countering these losses were additional sales resulting in 600,000
new members.
Toan said the company has met all of its third quarter integration goals.
Specifically, the company has: combined existing contracts and contracting
procedures related to both suppliers and providers; implemented financial
reporting systems and completed a systems integration plan for all other
systems, including knowledge systems, claims adjudication and mail service
systems; and consolidated financial operations.
Fourth quarter goals remain unchanged, said Toan, with the foremost goal
being implementation of a new sales and marketing program for enhanced PBM
services. Express Scripts also is on track to integrate computer platforms and
systems applications.
Express Scripts continued to receive positive contributions from its
advanced pharmacy benefits programs, such as Express TherapeuticsSM and Express
PreferenceSM, as well as its other complementary healthcare business units
including IVTx, the company's home infusion therapy division, in the third
quarter of 1998. The Practice Patterns Science subsidiary continued to increase
its registry database business.
The cost of revenues for the third quarter of 1998 increased 153.3 percent
to $738.5 million, compared with $291.6 million for the third quarter of 1997.
Third quarter SG&A expenses increased 173.9 percent to $43.2 million in 1998
from $15.8 million for the same period in 1997. That increase reflected
additional expenses related to the ongoing operations of ValueRx, as well as
costs associated with the integration of the two companies and amortization of
intangible assets. As a percentage of revenues, SG&A expenses, excluding
amortization of $3.2 million of intangible assets, remained consistent with
those reported during the same period of the prior year.
The company's positive cash flows continued to improve since the April 1,
1998, acquisition of ValueRx. As of Sept. 30, 1998, Express Scripts had cash,
cash equivalents and short-term investments of $101.1 million, a 23.4 percent
increase from June 30, 1998. Shareholders' equity at the end of the quarter was
$236.9 million, an increase of 16.3 percent compared with $203.7 million as of
Dec. 31. 1997.
For the first nine months of 1998, excluding the one-time pre-tax charge of
$1.7 million or 6 cents per share taken in the second quarter of 1998 related to
the restructuring of the company's managed vision business, Express Scripts
reported net income of $31.7 million, an increase of 29.9 percent compared with
$24.4 million in the first nine months of last year. On a diluted per share
basis, net income through Sept. 30, 1998, was $1.89, up 27.7 percent from the
$1.48 per share reported for the same period in 1997. Net revenues, which
include the contributions from the ValueRx acquisition in the second and third
quarters, grew by 125.1 percent to $1.99 billion in the nine months ended Sept.
30, 1998, from $882.4 million in 1997.
On Oct. 12, 1998, Express Scripts announced a two-for-one stock split of
its Class A and Class B common stock, to be effected in the form of a stock
dividend. The stock split is for shareholders of record as of Oct. 20, 1998, and
will be effective on or about Oct. 30, 1998.
Express Scripts, Inc. is a leading specialty managed care company and
believes it is the largest independent full-service pharmacy benefit management
(PBM) company in North America. Following its acquisition of ValueRx, the
company serves thousands of clients, including managed care organizations,
insurance carriers, third-party administrators, employers and union-sponsored
benefit plans. Together, Express Scripts and ValueRx manage more than $4.0
billion in annual drug spend. The company provides a full range of consultative
PBM services, including pharmacy network management, mail service, formulary
management, disease management and medical and drug data analysis services. The
company also provides medical information management services, which include
provider profiling and outcomes assessments, informed decision counseling
services and infusion therapy services. Express Scripts is headquartered in St.
Louis, and has additional major sites in Minneapolis; Bensalem, PA; Albuquerque,
NM; Tempe, AZ; Troy, NY; and Farmington Hills, MI. More information can be found
at HTTP://WWW.EXPRESS-SCRIPTS.COM.
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. The company's 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: risks associated with the consummation of acquisitions,
including the ability to successfully integrate the operations of acquired
businesses with the existing operations of the company and risks inherent in the
acquired entities operations; heightened competition, including increased price
competition in the pharmacy benefit management business; the possible
termination of the company's contracts with certain key clients or providers;
changes in pricing or discount practices of pharmaceutical manufacturers; the
ability of the company to consummate contract negotiations with prospective
clients; competition in the bidding and proposal process; adverse results in
certain litigation and regulatory matters; the adoption of adverse legislation
or regulations or a change in the interpretation of existing legislation or
regulations; the impact of increases in health care costs and utilization
patterns; risks associated with the development of new products; risks
associated with the "Year 2000" issue, including the ability of the company to
successfully convert its information systems and its non-information systems,
and the ability of its vendors/trading partners to successfully convert their
systems, to accommodate dates beyond December 31, 1999; and other risks
described from time to time in the company's filings with the Securities and
Exchange Commission. The company does not undertake any obligation to release
publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Financial tables follow.
<PAGE>
EXPRESS SCRIPTS, INC.
<TABLE>
Balance Sheet
($ in thousands)
(Unaudited)
<CAPTION>
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1998 1997 1997
<S> <C> <C> <C>
----------------- --------------- ------------------
Assets
Current assets
Cash and cash equivalents $101,100 $64,155 $45,742
Short term investments 57,938 57,172
-
Receivables, net 391,299 210,291 202,624
Inventories 42,344 28,935 20,758
Deferred taxes and prepaid expenses 50,303 2,649 3,066
----------------- --------------- ------------------
Total current assets 585,046 363,968 329,362
----------------- --------------- ------------------
Property and equipment (net) 75,392 26,821 26,797
Goodwill (net) 307,781 261
251
Other assets 87,459 11,468 12,014
================= =============== ==================
Total assets $1,055,678 $402,508 $368,434
================= =============== ==================
Liabilities and Stockholders' Equity
Current liabilities
Current portion long term debt $ 27,000 $ - $ -
Claims payable 238,767 153,051 132,492
Accounts payable 52,253 17,979 20,267
Accrued expenses 166,536 26,876 21,554
----------------- --------------- ------------------
Total current liabilities 484,556 197,906 174,313
Long term debt 333,000 - -
Other long term liabilities 1,199 901 1,180
----------------- --------------- ------------------
Total liabilities 818,755 198,807 175,493
----------------- --------------- ------------------
Total stockholders' equity 236,923 203,701 192,941
================= =============== ==================
Total liabilities and stockholders' equity $1,055,678 $402,508 $368,434
================= =============== ==================
</TABLE>
<PAGE>
EXPRESS SCRIPTS, INC.
<TABLE>
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE DATA)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- ---------------------------
1998 1997 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
-------------------------- ------------ ---------------------------- --------------
Net revenues $807,319 $319,937 152.34% $1,986,087 $882,442 125.07%
------------- ------------ --------------- -------------
Cost and expenses:
Cost of revenues 738,544 291,590 153.28% 1,820,593 803,794 126.50%
Selling, general & administrative 43,153 15,758 173.85% 101,245 42,789 136.61%
Corporate restructuring expenses - - nm 1,651 - nm
------------- ------------ --------------- -------------
781,697 307,348 154.34% 1,923,489 846,583 127.21%
------------- ------------ --------------- -------------
Operating income 25,622 12,589 103.53% 62,598 35,859 74.57%
------------- ------------ --------------- -------------
Other income (expense):
Interest income 1,794 1,609 11.50% 5,683 4,171 36.25%
Interest expense (6,912) (29) nm (13,793) (65) nm
------------- ------------ --------------- -------------
(5,118) 1,580 -423.92% (8,110) 4,106 -297.52%
------------- ------------ --------------- -------------
Income before income taxes 20,504 14,169 44.71% 54,488 39,965 36.34%
Provision for income taxes 9,201 5,556 65.60% 23,738 15,580 52.36%
------------- ------------ --------------- -------------
Net income $11,303 $8,613 31.23% $30,750 $24,385 26.10%
============= ============ =============== =============
Basic earnings per share $0.68 $0.53 28.30% $1.86 $1.49 24.83%
============= ============ =============== =============
Weighted average number of common shares out-
standing during the period - Basic EPS 16,561 16,400 0.98% 16,546 16,312 1.43%
============= ============ =============== =============
Diluted earnings per share $0.67 $0.52 28.85% $1.83 $1.48 23.65%
============= ============ =============== =============
Weighted average number of common shares out-
standing during the period - Diluted 16,841 16,593 1.49% 16,817 16,503 1.90%
EPS
============= ============ =============== =============
</TABLE>
nm - Not meaningful
<TABLE>
NON-FINANCIAL DATA
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- ------------------------------------------
1998 1997 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
------------------------- ------------ ----------------------------- -----------
Pharmacy network claims processed 30,556 18,160 68.26% 80,226 52,958 51.49%
Mail pharmacy claims filled
2,091 1,021 104.80% 5,267 2,865 83.84%
Number of pharmacies in network 51.4 50.3 2.19%
Pharmacy benefit covered lives 22,800 12,200 86.89%
Drug spend 1,261,364 630,162 100.17% 3,137,264 1,758,490 78.41%
</TABLE>
SELECTED RATIO ANALYSIS
EBITDA to Debt Ratio 2.7 1
Interest Coverage Ratio 4.7 1
Debt to Enterprise Value 20.7% 2
Cash Value per Share $6.02 2
Book Value per Share $14.10 2
1 - Annualized utilizing financial information subsequent to the
purchase of Value RX on April 1, 1998, excluding the Corporate
restructuring expenses.
2 - Based on financial information as of Sept. 30, 1998.
