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: April 19, 2000
Express Scripts, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Delaware 0-20199 43-1420563
- -------------------------------------------------------------------------------
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
corporation)
13900 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 April 19, 2000, 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 April 19, 2000, by Express
Scripts, Inc.
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: April 21, 2000 By: /s/ Barrett A. Toan
Barrett A. Toan
President and Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press release, dated April 19, 2000, by Express Scripts, Inc.
EXHIBIT 99.1
Express Scripts First Quarter Net Income Up 58 Percent; Diluted EPS Rises
38 Percent Cash Flow from Operations Grows to $61 Million
ST. LOUIS, April 19, 2000--Express Scripts, Inc. (NASD: ESRX) announced
first quarter 2000 net income of $21.4 million, or 55 cents per diluted share.
This is a 58 percent increase in net income and a 38 percent increase in diluted
earnings per share compared with $13.5 million, or 40 cents, in the first
quarter of 1999.
During the quarter, Express Scripts generated $60.7 million in cash flow
from operations, compared with the use of ($3.8) million in cash for the same
period of 1999. Approximately $30 million of the increase in cash flow from
operations was due to the reduction in inventory balances, which the company had
increased during the fourth quarter of 1999 to address the potential for higher
year-end demand in its mail pharmacies related to members' Y2K concerns.
"Our strong first quarter performance continues our track record of
earnings growth," stated Barrett Toan, president and chief executive officer.
"We're particularly pleased to report strong cash flow, which positions us well
to continue to effectively execute our business and financial strategies." As a
result of strong cash flow from operations, the company prepaid $30.0 million in
debt and repurchased 543,000 shares of its Class A Common Stock for $20.9
million during the first quarter.
Express Scripts reached several company milestones, including being ranked
for the first time among the nation's top 500 companies by Fortune and Forbes
magazines. In the Fortune 500, the company ranked #371, based on revenues. The
Forbes 500 ranked Express Scripts #353 in sales and #498 in profits. In January,
Express Scripts was also named a Forbes Platinum 400 company, based on a
combination of total return on capital, cash flow per share, and growth in sales
and net income.
"We're pleased to be included in these rankings based on our performance,"
stated Toan. "We consider the rankings to be significant, but even more
important is our goal of delivering value to our clients and employing our
capital to build economic profit."
Strong Operating Results
In the first quarter of 2000, revenues were $1.5 billion, a 64 percent
increase over $899.1 million in the same period of 1999. The year-to-year
increase is due to higher utilization; higher drug costs; the acquisition of
Diversified Pharmaceutical Services (DPS), which was completed on April 1, 1999;
and the conversion of DPS clients to the Express Scripts networks.
Gross profit increased 77 percent to $133.2 million in the first quarter of
2000 from $75.4 million for the comparable period of 1999. Selling, general and
administrative expenses (SG&A), excluding depreciation and amortization, were
$65.1 million, a 62 percent increase over the $40.2 million reported for the
comparable period of 1999. These increases are consistent with the increase in
revenues.
Network Claims and Mail Pharmacy Volumes Contribute To Growth
Pharmacy network claims processed increased to 59.4 million during the
first quarter of 2000, excluding 20.6 million from the United HealthCare (UHC)
contract, a 65 percent increase when compared with the first quarter a year ago,
prior to the DPS acquisition. Mail pharmacy prescriptions filled increased to
3.5 million during the first quarter of 2000, a 54 percent increase compared
with the first quarter a year ago, due primarily to internal growth. As of April
1, 2000, Express Scripts served approximately 38.5 million members, excluding
the 9.5 million members served under the UHC contract.
"We expect mail pharmacy services will continue to be an important growth
area as our clients seek additional value and consumers become more accustomed
to using the mail and Internet for routine prescription filling," said Toan.
"Our association with PlanetRx.com, our exclusive Internet pharmacy, is an
important component of this strategy."
Integration Supports Increased Services Expansion and Efficiency
During the first quarter, an additional 1.3 million Express Scripts members
began utilizing expanded services. This service expansion includes programs that
provide for more advanced formulary management and the addition of mail or
network service where only one of these services had been used previously.
New sales during the quarter include a contract Express Scripts signed with
Humana Inc. (NYSE: HUM) to provide Practice Patterns Science's advanced
decision-support technology for Humana's nearly six million members. The program
is intended to enhance Humana's population health program and provide network
information systems capabilities.
Further enhancing the integration of sales and customer service, Express
Scripts eliminated one of its claims processing platforms at the end of the
first quarter, consistent with the company's plan to consolidate and streamline
computer systems. "These positive results will facilitate further integration as
the company moves forward with consolidation of the three remaining claims
processing platforms," said Toan.
Express Scripts, Inc. is the nation's leading independent full-service
pharmacy benefit management (PBM) company. Through facilities in seven states
and Canada, the company serves thousands of clients throughout North America,
including managed care organizations, insurance carriers, third-party
administrators, employers and union-sponsored benefit plans.
Express Scripts provides fully-integrated PBM services, including network
claims processing, mail-order pharmacy services, benefit design consultation,
drug utilization review, formulary management, disease management, medical and
drug data analysis services, medical information management services (which
include development of data warehouses to combine medical claims and
prescription drug claims, disease management support services and outcome
assessments through the company's Health Management Services division and
Practice Patterns Science, Inc. subsidiary), and informed decision counseling
services through its Express Health Line SM division. The company also provides
non-PBM services, including infusion therapy services through its Express
Scripts Infusion Services subsidiary and distribution services through its
Specialty Distribution subsidiary. 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:
(i) risks associated with successfully completing its Internet strategy; (ii)
risks associated with the consummation and financing of acquisitions, including
the ability to successfully integrate the operations of acquired businesses with
our existing operations, client retention issues, and risks inherent in the
acquired entities operations; (iii) risks associated with obtaining financing
and capital; (iv) risks associated with our ability to manage growth; (v)
competition, including price competition, competition in the bidding and
proposal process and our ability to consummate contract negotiations with
prospective clients; (vi) the possible termination of contracts with certain key
clients or providers; (vii) the possible termination of contracts with certain
pharmaceutical manufacturers, changes in pricing, discount, rebate or other
practices of pharmaceutical manufacturers; (viii) adverse results in litigation;
(ix) adverse results in regulatory matters, the adoption of adverse legislation
or regulations, more aggressive enforcement of existing legislation or
regulations, or a change in the interpretation of existing legislation or
regulations; (x) developments in the healthcare industry, including the impact
of increases in healthcare costs, changes in drug utilization patterns and
introductions of new drugs; (xi) dependence on key members of management; (xii)
our relationship with New York Life Insurance Company, which possesses voting
control of the company; (xiii) other risks described from time to time in our
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
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Statement of Operations
(in thousands, except per share and percentage data)
<CAPTION>
Three Months Ended
March 31,
2000 1999 % Change
<S> <C> <C> <C>
Revenues $ 1,476,259 $ 899,087 64.2%
Cost and expenses:
Cost of revenues(1) 1,343,063 823,647 63.1%
Selling, general and administrative(2) 84,121 46,440 81.1%
1,427,184 870,087 64.0%
Operating income 49,075 29,000 69.2%
Interest income (expense):
Interest income 1,381 1,393 -0.9%
Interest expense (14,201) (6,222) 128.2%
(12,820) (4,829) 165.5%
Income before income taxes 36,255 24,171 50.0%
Provision for income taxes 14,823 10,628 39.5%
Net income $ 21,432 $ 13,543 58.3%
Basic earnings per share $ 0.56 $ 0.41 36.6%
Weighted average number of common shares
outstanding during the period - basic 38,540 33,211 16.0%
Diluted earnings per share $ 0.55 $ 0.40 37.5%
Weighted average number of common shares
outstanding during the period - diluted 39,206 34,154 14.8%
EBITDA(3) $ 70,642 $ 37,487 88.4%
<FN>
(1) Includes depreciation and amortization expense of $2,577, and $2,265,
respectively.
(2) Includes depreciation and amortization expense of $18,990, and
$6,222, respectively.
(3) EBITDA is earnings before interest, taxes, depreciation and
amortization (operating income plus depreciation and amortization). EBITDA is
presented because it is a widely accepted indicator of a company's ability to
incur and service indebtedness. EBITDA, however, should not be considered as an
alternative to net income as a measure of operating performance or an
alternative to cash flow as a measure of liquidity. In addition, our definition
of EBITDA may not be comparable to that reported by other companies.
</FN>
</TABLE>
<TABLE>
EXPRESS SCRIPTS, INC.
<CAPTION>
Unaudited Balance Sheet
(in thousands)
March 31, December 31,
2000 1999
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 131,547 $ 132,630
Receivables, net 720,587 783,086
Inventories 77,426 113,248
Deferred taxes 26,400 32,248
Prepaid expenses 3,504 5,143
Total current assets 959,464 1,066,355
Property and equipment, net 104,216 97,573
Investment in marketable securities 82,961 150,365
Goodwill, net 970,081 982,496
Other intangible assets, net 176,348 183,420
Other assets 7,993 7,102
Total assets $ 2,301,063 $ 2,487,311
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Claims and rebate payable $ 779,444 $ 850,630
Current portion of long-term debt - -
Accounts payable 98,047 112,731
Accrued expenses 126,879 136,997
Total current liabilities 1,004,370 1,100,358
Long-term debt 605,839 635,873
Other long-term liabilities 31,918 51,598
Total liabilities 1,642,127 1,787,829
Total stockholders' equity 658,936 699,482
Total liabilities and stockholders' equity $ 2,301,063 $ 2,487,311
</TABLE>
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Statement of Cash Flows
(in thousands)
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Cash flow from operating activities:
net income $ 21,432 $ 13,543
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 22,153 8,685
Other 17,091 (26,036)
Net cash provided by (used in) operating
activities 60,676 (3,808)
Cash flows from investing and financing activities:
Purchase of property and equipment (11,723) (5,677)
Repayment of long-term debt (30,000) -
Repurchase of Class A Common Stock (20,910) -
Other 874 2,734
Net cash (used in) investing and
financing activities (61,759) (2,943)
Net (decrease) in cash and cash equivalents (1,083) (6,751)
Cash and cash equivalents at beginning
of period 132,630 122,589
Cash and cash equivalents at end
of period $ 131,547 $ 115,838
</TABLE>
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Non-Financial Data
(in thousands, except percentage data)
<CAPTION>
Three Months Ended
March 31,
2000(1) 1999 % Change
<S> <C> <C> <C>
Drug spending $ 2,582,901 $ 1,450,481 78.1%
Pharmacy network claims processed 59,414 36,028 64.9%
Mail pharmacy prescriptions filled 3,515 2,279 54.2%
</TABLE>
<TABLE>
<CAPTION>
Selected Ratio Analysis
Actual Pro Forma(7)
<S> <C> <C>
Net debt to EBITDA ratio(2) 2.0x 1.7x
Interest coverage ratio(2) (4) 3.6x 4.4x
Debt to enterprise value(3) 27.2% 27.2%
Net debt to net capitalization(3) 41.9% 41.9%
Cash value per share(5) $3.41 $3.41
Book value per share (6) $17.10 $17.10
<FN>
(1) Drug spending and pharmacy network claims processed exclude UHC. Drug
spending and pharmacy network claims processed for UHC were $908,909 and 20,604,
respectively.
(2) Uses financial information for the twelve months ended March 31, 2000.
(3) Based on financial information as of March 31, 1999.
(4) Represents EBITDA divided by interest expense for the twelve months
ended March 31, 2000.
(5) Represents cash divided by 38,542 shares outstanding at March 31, 2000.
(6) Represents stockholders' equity divided by 38,542 shares outstanding at
March 31, 2000.
(7) Pro Forma excludes non-recurring charges, the gain on the sale of
assets and the extraordinary loss on early retirement of debt. Also, the Pro
Forma assumes the company's 5,175 common stock offering and $250,000 Senior
Notes offering occurred on April 1, 1999.
</FN>
</TABLE>
