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: July 28, 1998
Express Scripts, Inc.
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(Exact Name of Registrant as specified in its Charter)
Delaware 0-20199 43-1420563
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(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
corporation)
14000 Riverport Drive, Maryland Heights, Missouri 63043
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314) 770-1666
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On July 28, 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 July 28, 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: August 4, 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 July 28, 1998, by Express Scripts, Inc.
EXHIBIT 99. 1
EXPRESS SCRIPTS REPORTS STRONG
REVENUE AND INCOME GROWTH
168.7 PERCENT REVENUE GAIN AND OPERATING PROFIT GROWTH
REFLECT SUCCESS WITH INTEGRATION OF VALUERX
ST. LOUIS, July 28, 1998--Express Scripts, Inc. (NASDAQ:ESRX) today
reported second quarter 1998 revenues increased 168.7 percent to $807.4 million
compared with $300.5 million for the period one year ago. Excluding a previously
announced one-time, pre-tax charge of $1.7 million, or 6 cents per share,
related to the restructuring of its managed vision business, the company's net
income grew by 29.8 percent to $10.6 million from $8.1 million the prior year
and rose 26.0 percent on a diluted per share basis, to 63 cents from 50 cents.
Including the one-time charge, diluted earnings per share were 57 cents for the
quarter this year, an increase of 14.0 percent over the second quarter of 1997.
The growth in revenues for the second quarter of this year was driven in
large part by the contributions of ValueRx, which was acquired by Express
Scripts in a purchase transaction completed April 1, 1998. The ValueRx
acquisition also had a positive impact on operating profit for the quarter,
although these profits were offset by integration costs incurred during the
period. Cash flow for the quarter after eliminating the effects of the
acquisition increased by $43.6 million.
With the ValueRx purchase completed the combined Express Scripts/ValueRx
entity had approximately 22.7 million lives covered under its core pharmacy
benefit management programs as of July 1, strengthening Express
Scripts/ValueRx's position as the largest PBM independent of drug manufacturer
ownership.
"We are very pleased with the results of the second quarter, which is the
first period to include the combined operating results of the acquired ValueRx,"
said Barrett Toan, Express Scripts' president and chief executive officer. "We
were able to achieve our integration goals and operating objectives while
maintaining a non-dilutive earnings stream and positive cash flow for the
quarter. In addition, we were able to report a 700,000 life increase in
enrollment during the period. Our integration efforts remain on track and we
expect to be able to generate a package of enhanced services to the large group
and carrier market by the end of 1998."
According to Toan, the companies essentially now have completed the
combination of the executive, legal and other administrative functions, and are
coordinating their sales, marketing and customer service strategies. In
addition, a computer systems integration plan for finance, billing and
remittances, receivables and clinical functions has been developed, and is in
the process of being implemented.
Toan reiterated that the company is now concentrating on the third quarter
integration goals, which consist of: combining existing contracts and
contracting procedures related to both suppliers and providers; implementation
of financial reporting systems, and the completion of a systems integration plan
for all other systems, including knowledge systems, claims adjudication and mail
service systems, and the consolidation of financial operations.
Fourth quarter integration goals remain unchanged, according to Toan.
Progress has been made to ensure that the introduction of a new sales and
marketing proposition for enhanced PBM services will be available. The company
is also proceeding as planned to integrate computer platforms and systems.
As previously announced, Express Scripts incurred a one-time, pre-tax
charge of $1.7 million, or 6 cents per share, to account for the restructuring
of its managed vision subsidiary. Express Scripts will transfer certain
functions of its vision care unit to Cole Managed Vision, a subsidiary of Cole
National Corporation (NYSE:CNJ). The transaction will not have a material impact
on the company's revenues and earnings going forward.
Express Scripts' continued to receive positive contributions from its
advanced pharmacy benefits programs as well as its other complementary
healthcare business units and strategic alliances in the second quarter of 1998.
The company reported enrollment increases in its advanced pharmacy benefit
management services, Express TherapeuticsSM and Express PreferenceSM. The
company's operations in Canada had total enrollment of 1.1 million lives as of
the beginning of the third quarter. IVTx, the company's home infusion services
division, posted record sales and saw therapy days increase by 25.6 percent over
the second quarter of 1997. Express Scripts' Practice Patterns Science
subsidiary experienced an increase in its registry database business.
The cost of revenues for the second quarter of 1998 increased 170.5 percent
to $743.6 million, compared with $274.9 million for the second quarter of 1997.
Second quarter SG&A expenses increased 185.9 percent to $39.3 million in 1998
from $13.7 million 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 costs. As a
percentage of revenues, SG&A expenses, excluding amortization of $3.2 million of
intangible costs, decreased to 4.5 percent in 1998 versus 4.6 percent the prior
year.
As of June 30, 1998, Express Scripts had $81.9 million in cash, cash
equivalents and short-term investments, down from $122.1 million at the end of
1997. This reflects the impact of the ValueRx purchase, which closed on April 1,
1998. Shareholders' equity at the end of the quarter was $225.3 million, an
increase of 10.6 percent compared with $203.7 million as of Dec. 31, 1997.
For the first six months of 1998, Express Scripts reported net income of
$20.4 million, an increase of 29.6 percent compared with $15.8 million in the
first half of last year. On a diluted per share basis, net income through June
30, 1998 was $1.22, up 27.1 percent from the 96 cents per share reported for the
period in 1997. These figures exclude the second quarter 1998 one-time, pre-tax
charge of $1.7 million or 6 cents per share. Net revenues, which include the
contributions from the ValueRx acquisition in the second quarter, grew by 109.6
percent to $1,178.8 million in the six months ended June 30, 1998 from $562.5
million in 1997.
Express Scripts, Inc. is a leading specialty managed care company and the
largest independent pharmacy benefit management (PBM) company in North America.
Following its recent 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 over $4.0 billion in annual drug spend. The company
provides a full range of consultative PBM services, including pharmacy network
management, mail service and formulary management. The company also offers
disease management programs, informed decision counseling services, medical and
drug data analysis services, and infusion therapy services. Express Scripts is
headquartered in St. Louis, and has additional sites in Minneapolis;
Philadelphia; Albuquerque, N.M.; Tempe, Ariz.; Troy, N.Y. and Farmington Hills,
Mich. More information can be found at HTTP://WWW.EXPRESS-SCRIPTS.COM and
HTTP://WWW.VALUERX.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. THESE STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER
SIGNIFICANTLY FROM THOSE PROJECTED OR SUGGESTED. FACTORS THAT MAY IMPACT THESE
FORWARD-LOOKING STATEMENTS INCLUDE: 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, LOSS OF CLIENTS
IN THE TRANSITION PROCESS AND RISKS INHERENT IN THE ACQUIRED ENTITIES'
OPERATIONS; LOWER THAN EXPECTED SALES AND REVENUE GROWTH; HEIGHTENED
COMPETITION; 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 OF PROPOSAL PROCESS;
ADVERSE RESULTS IN CERTAIN LITIGATION AND REGULATORY MATTERS; THE ADOPTION OF
ADVERSE LEGISLATION OR A CHANGE IN THE INTERPRETATION OF EXISTING LEGISLATION OR
REGULATIONS; RISKS ASSOCIATED WITH THE DEVELOPMENT OF NEW PRODUCTS; AND OTHER
RISKS DESCRIBED FROM TIME TO TIME IN THE COMPANY'S PUBLIC FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Financial tables follow:
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<TABLE>
EXPRESS SCRIPTS, INC.
STATEMENT OF OPERATIONS
(in thousands, except per share and percentage data)
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------- -----------------------------
1998 1997 % Chg. 1998 1997 % Chg.
<S> <C> <C> <C> <C> <C> <C>
-------------- ------------- ------------ ------------- ------------- -------------
Net Revenues $807,406 $300,515 168.67% $1,178,768 $562,505 109.56%
-------------- ------------- ------------- -------------
Cost and expenses:
Cost of revenues 743,557 274,906 170.48 1,082,049 512,204 111.25
Selling, general, & 39,266 13,733 185.92 58,092 27,031 114.91
administrative
Corporate restructuring 1,651 - nm 1,651 - nm
expenses
-------------- ------------- ------------- -------------
784,474 288,639 171.78 1,141,792 539,235 111.74
-------------- ------------- ------------- -------------
Operating Income 22,932 11,876 93.10 36,976 23,270 58.90
-------------- ------------- ------------- -------------
Other income (expense):
Interest income 1,751 1,303 34.38 3,889 2,562 51.80
Interest expense (6,867) (18) nm (6,881) (36) nm
-------------- ------------- -------------- -------------
(5,116) 1,285 -489.13 (2,992) 2,526 -218.45
-------------- ------------- ------------- -------------
Income before income taxes 17,816 13,161 35.37 33,984 25,796 31.74
Provision for income taxes 8,248 5,030 63.98 14,537 10,024 45.02
-------------- ------------- ------------- -------------
Net income $ 9,568 $ 8,131 17.67 $ 19,447 $ 15,772 23.30
============== ============= ============= =============
Basic earnings per share $0.58 $0.50 16.00 $1.18 $0.97 21.65
============== ============= ============= =============
Weighted average number of
common shares outstanding
during the period--Basic 16,550 16,264 1.76 16,538 16,266 1.67
EPS
Diluted earnings per share $0.57 $0.50 14.00 $1.16 $0.96 20.8
============== ============= ============= =============
Weighted average number of
common shares outstanding
during the period--Diluted 16,821 16,476 2.09 16,805 16,456 2.1
EPS
</TABLE>
nm=Not meaningful
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<TABLE>
EXPRESS SCRIPTS, INC.
BALANCE SHEET
($ in thousands)
(unaudited)
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
<S> <C> <C> <C>
---------------- ----------------- ----------------
Assets
Current assets
Cash and cash equivalents $ 81,944 $ 64,155 $ 27,128
Short term investments - 57,938 56,581
Receivables, net 364,603 210,291 184,565
Inventories 41,567 28,935 26,332
Deferred taxes and prepaid expenses 50,401 2,649 3,499
Total current assets 538,515 363,968 298,105
Property and equipment (net) 69,794 26,821 26,717
Goodwill (net) 310,487 251 272
Other assets 92,289 11,468 12,288
Total assets $1,011,085 $ 402,508 $ 337,382
================ ================= ================
Liabilities and Stockholders' Equity
Current liabilities
Current Portion Long Term Debt $ 27,000 $ - $ -
Claims payable 222,312 153,051 120,669
Accounts payable 55,913 17,979 18,137
Accrued expenses 146,707 26,876 18,161
Total current liabilities 451,932 197,906 156,967
Long term debt 333,000 - -
Other long-term liabilities 827 901 1,572
Total liabilities 785,759 198,807 158,539
Total stockholders' equity 225,326 203,701 178,843
Total liabilities and stockholders'
equity $1,011,085 $ 402,508 $ 337,382
================ ================= ================
</TABLE>
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<TABLE>
EXPRESS SCRIPTS, INC.
NON-FINANCIAL DATA
(in thousands, except percentage data)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
---------------------------- ----------------------------
1998 1997 % Chg. 1998 1997 % Chg.
<S> <C> <C> <C> <C> <C> <C>
------------- ----------- ----------- ------------ ----------- -------------
Pharmacy network claims 30,642 17,777 72.37% 49,670 34,798 42.74%
processed
Mail pharmacy claims 2,108 958 120.04% 3,177 1,844 72.29%
filled
Number of pharmacies in 50.8 49.6 2.42%
network
Pharmacy benefit covered 22,700 11,600 95.69%
lives
Drug spend 1,197,600 595,000 101.28% 1,875,900 1,130,000 66.01%
</TABLE>
SELECTED RATIO ANALYSIS
QUARTER ENDED JUNE 30, 1998
EBITDA to Debt Ratio 2.78(1)
Interest Coverage Ratio 4.7(1)
Debt to Enterprise Value 21.0
Cash Value per Share $4.88
Book Value per Share $13.42
(1)Without the Vision restructuring expenses deducted
