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 March 31, 2000.
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.)
13900 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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Common stock outstanding as of April 30, 2000: 22,830,236 Shares Class A
15,020,000 Shares Class B
EXPRESS SCRIPTS, INC.
INDEX
Page Number
Part I
Financial Information 3
Item 1. Financial Statements (unaudited)
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 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 16
Part II
Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds - (Not Applicable)
Item 3. Defaults Upon Senior Securities - (Not Applicable)
Item 4. Submission of Matters to a Vote of Security Holders -
(Not Applicable)
Item 5. Other Information - (Not Applicable)
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 19
Index to Exhibits 20
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Item 1. Financial Statements
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet
<CAPTION>
March 31, December 31,
(in thousands) 2000 1999
<S> <C> <C>
---------------- ----------------
Assets
Current assets:
Cash and cash equivalents $ 131,547 $ 132,630
Receivables, less allowance for doubtful
accounts of $17,546 and $17,281, respectively 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
Investment in marketable securities 82,961 150,365
Property and equipment, less accumulated depreciation and amortization 104,216 97,573
Goodwill, less accumulated amortization 970,081 982,496
Other intangible assets, less accumulated amortization 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 rebates payable $ 779,444 $ 850,630
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 liabilities 31,918 51,598
---------------- ----------------
Total liabilities 1,642,127 1,787,829
---------------- ----------------
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, and no
shares issued and outstanding
Class A Common Stock, $0.01 par value, 150,000,000 shares authorized,
24,008,000 and 23,981,000 shares issued and outstanding, respectively 240 240
Class B Common Stock, $0.01 par value, 31,000,000 shares authorized,
15,020,000 shares issued and outstanding 150 150
Additional paid-in capital 419,926 418,921
Accumulated other comprehensive income (51,594) (9,521)
Retained earnings 317,972 296,540
---------------- ----------------
686,694 706,330
Class A Common Stock in treasury at cost, 1,008,000 and 465,000
shares, respectively (27,758) (6,848)
---------------- ----------------
Total stockholders' equity 658,936 699,482
================ ================
Total liabilities and stockholders' equity $ 2,301,063 $ 2,487,311
================ ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations
<CAPTION>
Three Months Ended
March 31,
(in thousands, except per share data) 2000 1999
<S> <C> <C>
---------------- ----------------
Revenues:
Revenues $ 1,472,540 $ 899,087
Other revenues 2,969 -
---------------- ----------------
1,475,509 899,087
Cost and expenses:
Cost of revenues 1,343,063 823,647
Selling, general and administrative 83,371 46,440
---------------- ----------------
1,426,434 870,087
---------------- ----------------
Operating income 49,075 29,000
---------------- ----------------
Interest income (expense):
Interest income 1,381 1,393
Interest expense (14,201) (6,222)
---------------- ----------------
(12,820) (4,829)
---------------- ----------------
Income before income taxes 36,255 24,171
Provision for income taxes 14,823 10,628
================ ================
Net income $ 21,432 $ 13,543
================ ================
Basic earnings per share $ 0.56 $ 0.41
================ ================
Weighted average number of common shares
outstanding during the period - Basic EPS 38,540 33,211
================ ================
Diluted earnings per share $ 0.55 $ 0.40
================ ================
Weighted average number of common shares
outstanding during the period - Diluted EPS 39,206 34,154
================ ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Changes in Stockholders' Equity
<CAPTION>
Number of Shares Amount
------------------- ------------------------------------------------------------------------------
Accumulated
Class A Class B Class A Class B Additional Other
Common Common Common Common Paid-in Comprehensive Retained Treasury
(in thousands) Stock Stock Stock Stock Capital Income Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------- --------- --------- --------- --------- ---------- -------------- ----------- ---------- ---------
Balance at December 31, 1999 23,981 15,020 $ 240 $ 150 $418,921 $ (9,521) $296,540 $(6,848) $699,482
--------- --------- --------- --------- ---------- -------------- ----------- ---------- ---------
Comprehensive income:
Net income - - - - - - 21,432 - 21,432
Other comprehensive
income,
Foreign currency
translation
adjustment - - - - - (14) - - (14)
Unrealized loss on
investment, net of tax
benefits of $25,344 - - - - - (42,059) - - (42,059)
--------- --------- --------- --------- ---------- -------------- ----------- ---------- ---------
Comprehensive income - - - - - (42,073) 21,432 - (20,641)
Repurchase of Class A
Common Stock - - - - - - - (20,910) (20,910)
Common stock issued under
employee plans 21 - - - 780 - - - 780
Exercise of stock options 6 - - - 168 - - - 168
Tax benefit relating to
employee stock options - - - - 57 - - - 57
--------- --------- --------- --------- ---------- -------------- ----------- ---------- ---------
Balance at March 31, 2000 24,008 15,020 $ 240 $ 150 $419,926 $ (51,594) $317,972 $(27,758) $658,936
========= ========= ========= ========= ========== ============== =========== ========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<TABLE>
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Cash Flows
<CAPTION>
Three Months Ended
March 31,
(in thousands) 2000 1999
<S> <C> <C>
--------------- ----------------
Cash flows from operating activities:
Net Income $ 21,432 $ 13,543
Adjustments to reconcile net income to net cash
provided operating activities:
Depreciation and amortization 22,153 8,685
Deferred income taxes 11,588 1,545
Bad debt expense 2,599 1,592
Tax benefit relating to employee stock options 57 1,571
Net changes in operating assets and liabilities 2,847 (30,744)
--------------- ----------------
Net cash provided by (used in) operating activities 60,676 (3,808)
--------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (11,723) (5,677)
--------------- ----------------
Net cash (used in) investing activities (11,723) (5,677)
--------------- ----------------
Cash flows from financing activities:
Repayment of long-term debt (30,000) -
Repurchase of Class A Common Stock (20,910) -
Other, net 888 2,722
--------------- ----------------
Net cash (used in) provided by financing activities (50,022) 2,722
--------------- ----------------
Effect of foreign currency translation adjustment (14) 12
--------------- ----------------
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>
See accompanying Notes to Consolidated Financial Statements
EXPRESS SCRIPTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting 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 our opinion, 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 included in our Annual Report on Form 10-K for the Year Ended
December 31, 1999, as filed with the Securities and Exchange Commission on March
29, 2000.
In our opinion, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Unaudited Consolidated Balance
Sheet at March 31, 2000, the Unaudited Consolidated Statement of Operations for
the three months ended March 31, 2000, and 1999, the Unaudited Consolidated
Statement of Changes in Stockholders' Equity for the three months ended March
31, 2000, and the Unaudited Consolidated Statement of Cash Flows for the three
months ended March 31, 2000, and 1999. Operating results for the three months
ended March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
Note 2 - Receivables
As of March 31, 2000 and December 31, 1999, unbilled receivables were
$356,951,000 and $416,740,000, respectively. Unbilled receivables are billed to
clients typically within 30 days based on the contractual billing schedule
agreed upon with the client.
Note 3 - Earnings Per Share
Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed in the same manner as basic earnings per share but adds the number of
additional common shares that would have been outstanding for the period if the
dilutive potential common shares had been issued. The only difference between
the number of weighted average shares used in the basic and diluted calculation
for all years is stock options and stock warrants we granted using the "treasury
stock" method.
Note 4 - Acquisition
On April 1, 1999, we completed our acquisition of Diversified
Pharmaceutical Services, Inc. and Diversified Pharmaceutical Services (Puerto
Rico) Inc. (collectively, "DPS"), from SmithKline Beecham Corporation and
SmithKline Beecham InterCredit BV (collectively, "SB") for approximately $715
million, which includes a purchase price adjustment for closing working capital
and transaction costs. We filed an Internal Revenue Code ss.338(h)(10) election,
making amortization expense of intangible assets, including goodwill, tax
deductible. We used approximately $48 million of our own cash and financed the
remainder of the purchase price and related acquisition costs.
The acquisition has been accounted for using the purchase method of
accounting. The results of operations of DPS have been included in the
consolidated financial statements and pharmacy benefit management ("PBM")
segment since April 1, 1999. The purchase price has been preliminarily allocated
based on the estimated fair values of net assets acquired at the date of the
acquisition. The excess of purchase price over tangible net assets acquired has
been preliminarily allocated to other intangible assets consisting of customer
contracts in the amount of $129,500,000 which are being amortized using the
straight-line method over the estimated useful lives of 1 to 20 years and
goodwill in the amount of $730,773,000 which is being amortized using the
straight-line method over the estimated useful life of 30 years. In conjunction
with the acquisition, DPS retained the following liabilities:
(in thousands)
- -------------------------------------------------------------
Fair value of assets acquired $ 1,006,028
Cash paid for the capital stock (714,678)
=======================
Liabilities retained $ 291,350
=======================
The following unaudited pro forma information presents a summary of our
combined results of operations and those of DPS as if the acquisition had
occurred at the beginning of the periods presented, along with certain pro forma
adjustments to give effect to amortization of goodwill, other intangible assets,
interest expense on acquisition debt and other adjustments. The pro forma
financial information is not necessarily indicative of the results of operations
as they would have been had the transaction been effected on the assumed date,
nor is it an indication of trends in future results.
Three Months Ended
March 31,
(in thousands, except per share data) 1999
- -------------------------------------------------------------------
Total revenues $ 964,453
Net income 14,720
Basic earnings per share 0.44
Diluted earnings per share 0.43
Note 5 - Marketable Securities
All investments not included in a money market fund are accounted for under
Financial Accounting Standards Board Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Available-for-sale securities are
reported at fair value, which is based upon quoted market prices, with
unrealized gains and losses, net of tax, reported as a component of other
comprehensive income in stockholders' equity until realized. Unrealized losses
are charged against income when a decline in fair value is determined to be
other than temporary.
At March 31, 2000 and December 31, 1999, available-for-sale securities
totaled $82,961,000 and $150,365,000, respectively, with related gross
unrealized losses, net of taxes of $42,059,000 and $9,555,000, respectively.
These unrealized losses are considered to be temporary, thus are reported as a
component of other comprehensive income in stockholders' equity. These
investments consist of shares of PlanetRx.com, Inc. common stock.
Note 6 - Financing
Our Senior Notes are unconditionally and joint and severally guaranteed by
our wholly-owned domestic subsidiaries other than Practice Patterns Sciences,
Inc., Great Plains Reinsurance Co., ValueRx of Michigan, Inc., Diversified NY
IPA, Inc., and Diversified Pharmaceutical Services (Puerto Rico), Inc. Separate
financial statements of the Guarantors are not presented as we have determined
them not to be material to investors. Therefore, the following condensed
consolidating financial information has been prepared using the equity method of
accounting in accordance with the requirements for presentation of such
information. We believe that this information, presented in lieu of complete
financial statements for each of the guarantor subsidiaries, provides sufficient
detail to allow investors to determine the nature of the assets held by, and the
operations of, each of the consolidating groups. As of January 1, 2000, we
undertook an internal corporate reorganization to eliminate various entities
whose existence was deemed to be no longer necessary, including, among others,
ValueRx Pharmacy Program, Inc. ("ValueRx"), and to create several new entities
to house certain activities, including Express Scripts Specialty Distribution
Services, Inc. ("SDS") and ESI Mail Pharmacy Services, Inc. ("ESI MPS").
Consequently, the assets, liabilities and operations of ValueRx are incorporated
into those of the issuer, Express Scripts, Inc. and the assets, liabilities and
operations of SDS and ESI MPS are incorporated into those of the Guarantors for
2000.
<TABLE>
<CAPTION>
Express Non-Guarantors
(in thousands) Scripts, Inc. Guarantors Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
- ------------------------------------------- ---------------- --------------- ---------------- --------------- ----------------
As of March 31, 2000
Current assets $ 794,115 $ 156,783 $ 8,566 $ - $ 959,464
Property and equipment, net 88,748 10,775 4,693 - 104,216
Investments in subsidiaries 725,468 - 2,261 (727,729) -
Investments in marketable securities - - 82,961 82,961
Intercompany 585,654 (570,505) (15,149) - -
Goodwill, net 258,400 706,274 5,407 - 970,081
Other intangible assets, net 67,746 108,556 46 - 176,348
Other assets 14,747 564 (7,171) (147) 7,993
================ =============== ================ =============== ================
Total assets $ 2,534,878 $ 412,447 $ 81,614 $ (727,876) $ 2,301,063
================ =============== ================ =============== ================
Current liabilities $ 657,450 $ 338,083 $ 8,837 $ - $ 1,004,370
Long-term debt 605,839 - - - 605,839
Other liabilities 72,433 2 (40,517) - 31,918
Stockholders' equity 1,199,156 74,362 113,294 (727,876) 658,936
---------------- --------------- ---------------- --------------- ----------------
Total liabilities and stockholders'
equity $ 2,534,878 $ 412,447 $ 81,614 $ (727,876) $ 2,301,063
================ =============== ================ =============== ================
As of December 31, 1999
Current assets $ 549,374 $ 506,976 $ 10,005 $ - $ 1,066,355
Property and equipment, net 39,036 55,386 3,151 - 97,573
Investments in subsidiaries 725,468 - 2,261 (727,729) -
Investments in marketable securities - - 150,365 150,365
Intercompany 463,438 (388,760) (74,678) - -
Goodwill, net 168 976,759 5,569 - 982,496
Other intangible assets, net 22,458 160,901 61 - 183,420
Other assets 13,179 799 (6,729) (147) 7,102
================ =============== ================ =============== ================
Total assets $ 1,813,121 $ 1,312,061 $ 90,005 $ (727,876) $ 2,487,311
================ =============== ================ =============== ================
Current liabilities $ 527,312 $ 563,002 $ 10,044 $ - $ 1,100,358
Long-term debt 635,873 - - - 635,873
Other liabilities 83,365 (16,294) (15,473) - 51,598
Stockholders' equity 566,571 765,353 95,434 (727,876) 699,482
---------------- --------------- ---------------- --------------- ----------------
Total liabilities and stockholders'
equity $ 1,813,121 $ 1,312,061 $ 90,005 $ (727,876) $ 2,487,311
================ =============== ================ =============== ================
Three months ended March 31, 2000
Total revenues $ 906,852 $ 563,281 $ 5,376 $ - $ 1,475,509
Operating expenses 881,169 538,678 6,587 - 1,426,434
---------------- --------------- ---------------- --------------- ----------------
Operating income (loss) 25,683 24,603 (1,211) - 49,075
Interest income (expense), net (12,816) (2) (2) - (12,820)
---------------- --------------- ---------------- --------------- ----------------
Income (loss) before tax effect 12,867 24,601 (1,213) - 36,255
Income tax provision (benefit) 5,243 10,062 (482) - 14,823
================ =============== ================ =============== ================
Net income (loss) $ 7,624 $ 14,539 $ (731) $ - $ 21,432
================ =============== ================ =============== ================
Three months ended March 31, 1999
Total revenues $ 493,545 $ 401,878 $ 3,664 $ - $ 899,087
Operating expenses 466,356 400,698 3,033 - 870,087
---------------- --------------- ---------------- --------------- ----------------
Operating income 27,189 1,180 631 - 29,000
Interest income (expense), net (4,939) 66 44 - (4,829)
---------------- --------------- ---------------- --------------- ----------------
Income before tax effect 22,250 1,246 675 - 24,171
Income tax provision 8,451 1,894 283 - 10,628
================ =============== ================ =============== ================
Net income (loss) $ 13,799 $ (648) $ 392 $ - $ 13,543
================ =============== ================ =============== ================
</TABLE>
Note 7 - Restructuring
During the second quarter of 1999, we recorded a pre-tax restructuring
charge of $9,400,000 associated with the consolidation of our Plymouth,
Minnesota facility into our Bloomington, Minnesota facility. In December 1999,
the associated accrual was reduced by $2,301,000, primarily as a result of
subleasing a portion of the unoccupied space. The consolidation plan includes
the relocation of all employees at the Plymouth facility to the Bloomington
facility that began in August 1999 and will end in the third quarter of 2000.
Included in the restructuring charge are anticipated cash expenditures of
approximately $4,823,000 for lease termination fees and rent on unoccupied space
(which payments will continue through April 2001, when the lease expires) and
anticipated non-cash charges of approximately $2,276,000 for the write-down of
leasehold improvements and furniture and fixtures. The restructuring charge does
not include any costs associated with the physical relocation of the employees.
During December 1999, we recorded a pre-tax restructuring charge of
$2,633,000 associated with the outsourcing of our computer operations to EDS.
The principal actions of the plan included cash expenditures of approximately
$2,148,000 for the transition of 51 employees to the outsourcer and the
elimination of contractual obligations of ValueRx, which had no future economic
benefit to us, and non-cash charges of approximately $485,000 due to the
reduction in the carrying value of certain capitalized software to its net
realizable value. We expect to complete this plan during the second quarter of
2000 when remaining cash payments will be made.
Also in December 1999, we recorded a pre-tax restructuring charge of
$969,000 associated with restructuring our Practice Patterns Science, Inc.
("PPS") majority-owned subsidiary and the purchase of the remaining PPS Common
Stock from management. The charge consists of cash expenditures of $559,000
relating to stock compensation expense and $410,000 of severance payments to 9
employees (of which $133,000 was paid during December 1999). This plan was
completed in January 2000.
<TABLE>
<CAPTION>
Balance at Balance at
December 31, 2000 2000 March 31,
(in thousands) 1999 Additions Usage 2000
<S> <C> <C> <C> <C>
- ------------------------------------- ---------------- ------------- ------------ ----------------
Non-cash
Write-down of long-lived assets $ 28 $ - $ - $ 28
Cash
Employee transition costs 1,592 - 1,592 -
Stock compensation 559 - 559 -
Termination fees and rent 1,338 - 113 1,225
================ ============= ============ ================
$ 3,517 $ - $ 2,264 $ 1,253
================ ============= ============ ================
</TABLE>
All of the restructuring charges which include tangible assets to be
disposed of are written down to their net realizable value, less cost of
disposal. We expect recovery to approximate its cost of disposal. Considerable
management judgment is necessary to estimate fair value; accordingly, actual
results could vary from such estimates.
Note 8 - Common Stock
As of March 31, 2000, we have repurchased a total of 1,018,000 shares of
our Class A Common Stock under the stock repurchase program that we announced on
October 25, 1996, 543,000 shares of which were repurchased during the first
quarter of 2000. Our Board of Directors approved the repurchase of up to
2,500,000 shares, and placed no limit on the duration of the program. Additional
purchases, if any, will be made in such amounts and at such times as we deem
appropriate based upon prevailing market and business conditions, subject to
restrictions on stock repurchases contained in our bank credit facility and the
Indenture under which our Senior Notes were issued.
Note 9 - Segment Reporting
We are organized on the basis of services offered and have determined that
we have two reportable segments: PBM services and non-PBM services. We manage
the pharmacy benefit within an operating segment that encompasses a
fully-integrated PBM service. The remaining two operating service lines (IVTx
and Specialty Distribution) have been aggregated into a non-PBM reporting
segment.
The following table presents information about the reportable segments for
the three months ended March 31:
(in thousands) PBM Non-PBM Total
- -----------------------------------------------------------------------
2000
Total revenues $ 1,454,241 $ 21,268 $1,475,509
Income before income taxes 31,064 5,191 36,255
- -----------------------------------------------------------------------
1999
Total revenues $ 884,436 $ 14,651 $ 899,087
Income before income taxes 22,660 1,511 24,171
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
In this Item 2, "we," "us," "our" and the "Company" refer to Express
Scripts, Inc. and its subsidiaries, unless the context indicates otherwise.
Information included in this Quarterly Report on Form 10-Q, and information that
may be contained in other filings by us with the Securities and Exchange
Commission ("SEC") and releases issued or statements made by us, contain or may
contain forward-looking statements, including but not limited to statements of
our plans, objectives, expectations or intentions. Such forward-looking
statements necessarily involve risks and uncertainties. Our 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:
o risks associated with the implementation of our Internet strategy
o risks associated with the integration of ValueRx and DPS
o risks associated with our leverage and debt service obligations
o risks associated with our ability to manage and maintain internal growth
o competition, including price competition, competition in the
bidding and proposal process and our ability to consummate
contract negotiations with prospective clients
o the possible termination of contracts with certain key clients or providers
o the possible loss of relationships with pharmaceutical
manufacturers, or changes in pricing, discount, rebate or other
practices of pharmaceutical manufacturers
o adverse results in litigation
o 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
o developments in the healthcare industry, including the impact of
increases in health care costs, changes in drug utilization
patterns and introductions of new drugs
o dependence on key members of management
o our relationship with New York Life Insurance Company, which possesses
voting control of us
o other risks described from time to time in our filings with the SEC
We do not undertake any obligation to release publicly any revisions to
such forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
OVERVIEW
During the first quarter of 2000 we continued to execute our growth
strategy of generating sales to new clients, expanding the services provided to
existing clients and developing new products and services for sale to existing
clients and pharmaceutical manufacturers. As previously disclosed, on April 1,
1999, we acquired Diversified Pharmaceutical Services, Inc. and Diversified
Pharmaceutical Services (Puerto Rico) Inc. (collectively, "DPS"), from
SmithKline Beecham Corporation ("SmithKline Beecham") and SmithKline Beecham
InterCredit BV for approximately $715 million, which includes a purchase price
adjustment for closing working capital and transaction costs. Consequently, our
operating results include those of DPS from April 1, 1999. The net assets
acquired from DPS have been preliminarily recorded at their estimated fair
value, resulting in $730,773,000 of goodwill that is being amortized over 30
years. This acquisition has been accounted for under the purchase method of
accounting.
The acquisition of DPS increased our membership base to approximately 38.5
million members, excluding the 9.5 million members served under the United
HealthCare ("UHC") contract, as of March 31, 2000 from approximately 23 million
lives as of March 31, 1999. We have one of the largest managed care membership
bases of any pharmacy benefit management ("PBM") company. Although our
membership counts are based on eligibility data provided by our clients, they
necessarily involve some estimates, extrapolations and approximations. As one
example, some plan designs allow for family coverage under a single
identification number, and we make assumptions about the average number of
persons per family in calculating the membership covered by such plans. Because
these assumptions may vary between PBMs, membership counts may not be comparable
between our competitors and us. However, we believe our membership count
provides a reasonable estimation of the population we serve, and can be used as
one measure of our growth.
We derive our revenues primarily from the sale of PBM services in the
United States and Canada. Our PBM revenues generally include administrative
fees, dispensing fees and ingredient costs of pharmaceuticals dispensed from
retail pharmacies included in one of our networks or from one of our mail
pharmacies, and the associated costs are recorded in cost of revenues (the
"Gross Basis"). Where we only administer the contracts between our clients and
the clients' retail pharmacy networks, as is the case for most of the customer
contracts with DPS, we record as revenues only the administrative fee we receive
from our activities (the "Net Basis"). We also derive PBM revenues from the sale
of informed decision counseling services through our Express Health LineSM
division, and the sale of medical information management services (which include
the development of data warehouses to combine medical claims and prescription
drug claims), disease management support services and quality and outcomes
assessments through our Health Management Services ("HMS") division and Practice
Patterns Science, Inc. ("PPS") subsidiary.
Non-PBM revenues are derived from:
o The sale of pharmaceuticals for and the provision of infusion
therapy services through our subsidiary IVTx, Inc., doing business
as Express Scripts Infusion Services
o Administrative fees received from drug manufacturers for the
dispensing or distribution of their pharmaceuticals requiring
special handling or packaging through our Express Scripts
Specialty Distribution Services subsidiary
RESULTS OF OPERATIONS
REVENUES
<TABLE>
<CAPTION>
Three Months Ended March 31,
(in thousands) 2000 Increase 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
PBM Gross Basis revenues $ 1,377,468 56.8% $ 878,254
PBM Net Basis revenues 73,804 1,093.9% 6,182
Other revenues 2,969 nm -
----------------------------------------
Total PBM revenues $ 1,454,241 64.4% $ 884,436
Non-PBM revenues 21,268 45.2% 14,651
========================================
Total revenues $ 1,475,509 64.1% $ 899,087
========================================
</TABLE>
nm = not meaningful
Our growth in PBM Gross Basis revenues during the first quarter of 2000
over 1999 is primarily due to increased member utilization and higher drug
ingredient costs resulting from price increases for existing drugs, new drugs
introduced into the marketplace and the conversion of DPS clients to our
network. Our growth in PBM Net Basis revenues during the first quarter of 2000
over 1999 is the result of our acquisition of DPS.
Revenues for network pharmacy claims and network pharmacy claims processed
increased $404,554,000, or 62.8%, and 43,990,000, or 122.1%, respectively,
during the first quarter of 2000 over 1999. The average revenue per network
pharmacy claim decreased 26.7% from the first quarter of 1999 primarily due to
the acquisition of DPS, as DPS records revenue on the Net Basis which
substantially reduces the average revenue per network pharmacy claim. Excluding
DPS, the average revenue per network pharmacy claim increased 22.3% over the
first quarter of 1999.
Revenues for mail pharmacy services during the first quarter of 2000
increased $160,393,000, or 68.9%, over first quarter of 1999 as a result of the
growth in mail pharmacy claims processed of 1,236,000 claims, or 54.2%, during
the same period. These increases are primarily due to increased utilization by
existing members as well as the addition of new members having high mail
utilization. For the three months ended March 31, 2000 the average revenue per
mail pharmacy claim increased 9.5% over the three months ended March 31, 1999
primarily due to higher drug ingredient costs as stated above.
The increase in revenue for non-PBM services in the first quarter of 2000
is primarily due to additional volume within our Specialty Distribution Services
subsidiary resulting from a new contract that took effect during the fourth
quarter of 1999.
<TABLE>
COST AND EXPENSES
<CAPTION>
Three Months Ended March 31,
(in thousands) 2000 Increase 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PBM $ 1,328,864 63.6% $ 812,092
Percentage of total PBM revenues 91.4% 91.8%
Non-PBM 14,199 22.9% 11,555
Percentage of non-PBM revenues 66.8% 78.9%
---------------------------------------
Cost of revenues 1,343,063 63.1% 823,647
Percentage of total revenues 91.0% 91.6%
Selling, general and administrative 64,381 60.1% 40,218
Percentage of total revenues 4.4% 4.5%
Depreciation and amortization(1) 18,990 205.2% 6,222
Percentage of total revenues 1.3% 0.7%
=======================================
Total cost and expenses $ 1,426,434 63.9% $ 870,087
=======================================
Percentage of total revenues 96.7% 96.8%
<FN>
(1) Represents depreciation and amortization expense included in selling,
general and administrative expenses on our Statement of Operations. Cost of
revenues, above, also includes depreciation and amortization expense on property
and equipment of $2,577 and $2,265 for the three months ended March 31, 2000 and
1999, respectively.
</FN>
</TABLE>
Our cost of revenues for PBM services as a percentage of total PBM revenues
decreased slightly in the first quarter of 2000 from 1999 primarily due to the
acquisition of DPS, as DPS records revenues under the Net Basis. In future
periods, we expect the gross margin percentage will continue to be somewhat
higher than in prior periods until we convert DPS clients to our pharmacy
networks. As this conversion occurs, we will record revenues for converted
clients on the Gross Basis and we anticipate that the gross margin percentage
will then begin to decline, although profitability is not expected to be
adversely affected by these changes.
Cost of revenues for non-PBM services decreased as a percentage of non-PBM
revenues for the first quarter of 2000 from 1999 primarily due to additional
volume of business within our Specialty Distribution Services subsidiary, where
we record as revenue our administrative fee for distributing pharmaceutical
products held on consignment for manufacturers. The subsidiary was also able to
derive operating cost efficiencies as a result of the higher volume from its new
contract.
Selling, general and administrative expenses, excluding depreciation and
amortization, increased $24,163,000 or 60.1%, in the first quarter of 2000 over
1999. However, as a percentage of total revenue, selling, general and
administrative expenses decreased slightly to 4.4%. The increase in 2000 is
primarily due to our acquisition of DPS, costs incurred during the integration
of DPS and ValueRx ($2,629,000 in the first quarter of 2000 and $1,587,000 in
the first quarter of 1999), costs incurred in funding our Internet initiatives
and expenditures required to expand the operational and administrative support
functions to enhance management of the pharmacy benefit. During the first
quarter of 2000 and 1999, we capitalized $3,420,000 and $1,081,000,
respectively, in new systems development costs related to integration.
Depreciation and amortization substantially increased for the three months
ended March 31, 2000 over 1999 due to the acquisition of DPS. During 2000, we
have recorded amortization expense for goodwill and other intangible assets of
$16,476,000 compared to $4,277,000 in 1999. The remaining increases in 2000 were
primarily due to integration, expanding our operations and enhancing our
information systems to better serve our clients.
INTEREST INCOME (EXPENSE), NET
The $7,979,000, or 128.2% increase for the quarter ended March 31, 2000
over the 1999 interest expense is due to the debt incurred to purchase DPS on
April 1, 1999.
PROVISION FOR INCOME TAXES
Our effective tax rate for continuing operations decreased to 40.9% for the
first quarter of 2000 from 44.0% for the first quarter of 1999 primarily due to
the reduction in the non-deductible goodwill and customer contract amortization
expense associated with the ValueRx acquisition as a percentage of income before
income taxes. The goodwill and customer contract amortization for the DPS
acquisition is deductible for income tax purposes due to the filing of an
Internal Revenue Code ss.338(h)(10) election.
NET INCOME AND EARNINGS PER SHARE
Our net income increased $7,889,000, or 58.3%, for the first quarter of
2000 over 1999. Basic and diluted weighted average shares outstanding for the
first quarter of 2000 increased 36.6% and 37.5%, respectively, over the first
quarter of 1999. The increase for both basic and diluted shares outstanding is
primarily related to our offering of 5,175,000 shares of our Class A Common
Stock in June 1999, slightly offset by the repurchase of 543,000 shares of our
Class A Common Stock during the first quarter of 2000 under the open-market
stock repurchase program (see "--Liquidity and Capital Resources").
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2000, net cash provided by operations increased
$64,484,000 to $60,676,000 from net cash used of $3,808,000 in 1999. This
increase is primarily due to bringing our inventory levels back down to our
normal operating levels after increasing our inventory during the fourth quarter
of 1999 by approximately $30,000,000 for our mail pharmacies' anticipation of
potentially higher demand due to our members' Year 2000 concerns.
Days sales outstanding ("DSO") decreased to 31.5 days at March 31, 2000
from 37.0 days at March 31, 1999. Gross revenues must be used to calculate the
days sales outstanding due to the impact of the Gross Basis versus the Net Basis
of recording revenues, as discussed in "--Overview" and "-- Revenues." The
accounts receivable balance includes the cost of the pharmaceutical dispensed,
which may not be included in revenues, as required by generally accepted
accounting principles, based on the contractual terms embedded in client and
pharmacy contracts. The following table presents our days sales outstanding for
the years ended:
<TABLE>
<CAPTION>
Three Months Ended March 31,
(in thousands) 2000 1999
<S> <C> <C>
- -------------------------------------------------------------------------------
Total revenues $ 1,475,509 $ 899,087
Client/pharmacy pass through 795,979 232,962
================ ===============
Total $ 2,271,488 $ 1,132,049
================ ===============
Average monthly gross receivables $ 786,595 $ 465,424
================ ===============
DSO 31.5 37.0
================ ===============
</TABLE>
Our allowance for doubtful accounts has increased $265,000 or 1.5% to
$17,546,000 at March 31, 2000 from $17,281,000 at December 31, 1999. As a
percentage of at risk receivables (i.e., receivables for which we have a
corresponding contractual obligation to pay the applicable retail pharmacy), the
allowance for doubtful accounts is 2.9% at March 31, 2000 compared to 2.6% at
December 31, 1999.
We previously announced that we anticipated our cash flow from operations
will be temporarily reduced by approximately $20,000,000 due to the termination
of the United HealthCare contract during the third quarter of 2000. We are
currently discussing with UHC a revision to the previously announced transition
plan, which, if implemented, could extend the transition period and cause the
temporary cash reduction to occur after the third quarter of 2000. The effect of
any such extension would be to reduce the maximum amount of the reduction and
spread the effect over a longer period of time, thereby reducing the effect in
any one quarter. We expect to primarily fund the termination of the United
HealthCare contract in 2000 with operating cash flow. We will continue to
utilize our operating cash flows for future debt prepayments, stock repurchases,
integration costs, Internet initiatives and other normal operating cash needs as
we deem appropriate.
Our capital expenditures for the three months ended March 31, 2000
increased $6,046,000 or 106.5% over 1999 primarily due to integration related
activities as a result of our acquisitions, our concerted effort to invest in
our information technology to enhance the services provided to our clients and
the continued renovation of our St. Louis site operations facility. We expect to
continue investing in technology that will provide efficiencies in operations,
manage growth and enhance the service provided to our clients. We expect to fund
future anticipated capital expenditures primarily with operating cash flow or,
to the extent necessary, with working capital borrowings under our $300 million
revolving credit facility, discussed below.
During the first quarter of 2000, we used our excess cash balances to
prepay $30,000,000 on our bank revolving facility and repurchase 543,000 shares
of our class A Common Stock for $20,910,000. As of March 31, 2000, we have
repurchased a total of 1,018,000 shares of our Class A Common Stock under the
stock repurchase program that we announced on October 25, 1996. Our Board of
Directors approved the repurchase of up to 2,500,000 shares, and placed no limit
on the duration of the program. Additional debt prepayments or common stock
repurchases, if any, will be made in such amounts and at such times as we deem
appropriate based upon prevailing market and business conditions, subject to
restrictions on stock repurchases contained in our bank credit facility and the
Indenture under which our Senior Notes were issued.
We have a credit facility with a bank syndicate led by Credit Suisse First
Boston and Bankers Trust Company consisting of $285 million of Term A loans and
a $300 million revolving credit facility. The Term A loans and the revolving
credit facility mature on March 31, 2005. The credit facility is secured by the
capital stock of each of our existing and subsequently acquired domestic
subsidiaries, excluding Practice Patterns Science, Inc., Great Plains
Reinsurance, ValueRx of Michigan, Inc., Diversified NY IPA, Inc. and Diversified
Pharmaceutical Services (Puerto Rico), Inc., and is also secured by 65% of the
stock of our foreign subsidiaries.
The credit facility requires us to pay interest quarterly on an interest
rate spread based on several London Interbank Offered Rates ("LIBOR") or base
rate options. Using a LIBOR spread, the Term A loans and the revolving loan had
an interest rate of 8.21% on March 31, 2000. To alleviate interest rate
volatility, we have entered into two separate swap arrangements, which are
discussed in "--Market Risk" below. Beginning in March 2001, we are required to
make annual principal payments on the Term A loans of $42,750,000 in 2001,
$57,000,000 in 2002 and 2003, $62,700,000 in 2004 and $65,550,000 in 2005. The
credit facility contains covenants that limit the indebtedness we may incur,
dividends paid and the amount of annual capital expenditures. The covenants also
establish a minimum interest coverage ratio, a maximum leverage ratio, and a
minimum fixed charge coverage ratio. In addition, we are required to pay an
annual fee of 0.5%, payable in quarterly installments, on the unused portion of
the revolving credit facility ($230 million at March 31, 2000). At March 31,
2000, we are in compliance with all covenants associated with the credit
facility.
In June 1999, we issued $250 million of 9 5/8% Senior Notes due 2009, which
require interest to be paid semi-annually on June 15 and December 15 of each
year. The Senior Notes are callable at specified rates beginning in June 2004.
The Senior Notes are unconditionally and joint and severally guaranteed by our
wholly-owned domestic subsidiaries other than PPS, Great Plains Reinsurance Co.,
ValueRx of Michigan, Inc., Diversified NY IPA, Inc., and Diversified
Pharmaceutical Services (Puerto Rico), Inc. In April 2000, we repurchased
approximately $3 million of the Senior Notes on the open market.
We have reviewed and currently intend to continue reviewing potential
acquisitions and affiliation opportunities. We believe that available cash
resources, bank financing or the issuance of additional common stock could be
used to finance such acquisitions or affiliations. However, there can be no
assurance we will make other acquisitions or affiliations in 2000 or thereafter.
OTHER MATTERS
In June 1998, Financial Accounting Standards Board Statement 133,
Accounting for Derivative Instruments and Hedging Activities ("FAS 133") was
issued. FAS 133 requires all derivatives to be recognized as either assets or
liabilities in the statement of financial position and measured at fair value.
In addition, FAS 133 specifies the accounting for changes in the fair value of a
derivative based on the intended use of the derivative and the resulting
designation. The effective date for FAS 133 was originally effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. However, the
Financial Accounting Standards Board has deferred the effective date so that it
will begin for all fiscal quarters of fiscal years beginning after June 15,
2000, and will be applicable to our first quarter of fiscal year 2001. Our
present interest rate swaps will be considered cash flow hedges. Accordingly,
the change in the fair value of the swaps will be reported on the balance sheet
as an asset or liability. The corresponding unrealized gain or loss representing
the effective portion of these hedges will be initially recognized in
stockholders' equity and other comprehensive income and subsequently any changes
in unrealized gain or loss from the initial measurement date will be recognized
in earnings concurrent with the interest expense on our underlying variable rate
debt. If we had adopted FAS 133 as of March 31, 2000, we would have recorded the
unrealized gain of $8,175,000 as an asset and increase in stockholders' equity
and other comprehensive income.
IMPACT OF INFLATION
Changes in prices charged by manufacturers and wholesalers for
pharmaceuticals affect our revenues and cost of revenues. To date, we have been
able to recover price increases from our clients under the terms of our
agreements, although under selected arrangements in which we have performance
measurements on drug costs with our clients we could be adversely affected by
inflation in drug costs if the result is an overall increase in the cost of the
drug plan to the client. To date, changes in pharmaceutical prices have not had
a significant adverse affect on us.
MARKET RISK
We have entered into two interest rate swaps that have fixed the interest
rate as of March 31, 2000 for $306 million of our variable rate debt under our
Credit Facility. As of March 31, 2000, only one swap is effective, with a
notional principal amount of $306 million and a fixed rate of interest of 5.88%
per annum, plus the interest rate spread of 2%. This swap began amortizing in
April 1999 in semi-annual installments that increased to $36 million in April
2000, reducing the principal notional amount of the swap to $270 million. Also
in April 2000, our second swap became effective with an initial notional
principal amount of $15 million and a fixed rate of interest of 6.25% per annum,
plus the interest rate spread of 2%. Therefore, starting in April 2000, we have,
in effect, converted $270 million of our variable rate debt under our Credit
Facility to fixed rate debt at 5.88% per annum, plus the interest rate spread of
2%, and $15 million of our variable rate debt under our Credit Facility to fixed
rate debt at 6.25% per annum, plus the interest rate spread of 2%. The fair
value of the swaps at March 31, 2000 is $8,175,000.
Interest rate risk is monitored on the basis of changes in the fair value
and a sensitivity analysis is used to determine the impact interest rate changes
will have on the fair value of the interest rate swaps, measuring the change in
the net present value arising from the change in the interest rate. The fair
value of the swaps are then determined by calculating the present value of all
cash flows expected to arise thereunder, with future interest rate levels
implied from prevailing mid-market yields for money-market instruments, interest
rate futures and/or prevailing mid-market swap rates. Anticipated cash flows are
then discounted on the assumption of a continuously compounding zero-coupon
yield curve. A 10 basis point decline in interest rates at March 31, 2000 would
have caused the fair value of the swaps to decrease by $2,661,000, resulting in
a fair value of $5,514,000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Response to this item is included in Item 2 "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Market Risk" above.
- --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
As discussed in detail in the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1998, filed with the Securities and Exchange
Commission on August 13, 1998 (the "Second Quarter 10-Q"), the Company acquired
all of the outstanding capital stock of Value Health, Inc., a Delaware
corporation ("VHI"), and Managed Prescription Network, Inc., a Delaware
corporation ("MPN") from Columbia HCA/HealthCare Corporation ("Columbia") and
its affiliates on April 1, 1998 (the "Acquisition"). VHI, MPN and/or their
subsidiaries (collectively, the "Acquired Entities"), were party to various
legal proceedings, investigations or claims at the time of the Acquisition. The
effect of these actions on the Company's future financial results is not subject
to reasonable estimation because considerable uncertainty exists about the
outcomes. Nevertheless, in the opinion of management, the ultimate liabilities
resulting from any such lawsuits, investigations or claims now pending will not
materially affect the consolidated financial position, results of operations or
cash flows of the Company. A brief update of the most notable of the proceedings
follows:
As discussed in detail in the Second Quarter 10-Q, the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1998, filed with the
Securities and Exchange Commission on November 16, 1998, the Company's Annual
Report on Form 10-K/A for the year ended December 31, 1998, filed with the
Securities and Exchange Commission on June 10, 1999, the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1999, filed with the
Securities and Exchange Commission on May 14, 1999, the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1999, filed with the
Securities and Exchange Commission on August 12, 1999, the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1999, filed with the
Securities and Exchange Commission on November 15, 1999, and the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, filed with the
Securities and Exchange Commission on March 29, 2000, VHI and one of its
subsidiaries are party to two securities litigation matters, Bash, et al. v.
Value Health, Inc., et al., No. 3:97cv2711 (JCH) (D.Conn.), and Freedman, et al.
v. Value Health, Inc., et al., No. 3:95 CV 2038 (JCH) (D.Conn). The two
lawsuits, filed in 1995, allege that VHI and certain other defendants made false
or misleading statements to the public in connection with VHI's acquisition of
Diagnostek, Inc. in 1995. The Bash lawsuit also alleges false or misleading
statements by Diagnostek and certain of its former officers and directors
concerning its financial condition prior to its acquisition by VHI. On April 24,
1998, the two lawsuits were consolidated.
On February 18, 1999, the court granted plaintiffs' motions for class
certification and certified a class consisting of (i) all persons who purchased
or otherwise acquired shares of VHI during the period from April 3, 1995,
through and including November 7, 1995, including those who acquired shares
issued in connection with the Diagnostek transaction; and (ii) all persons who
purchased or otherwise acquired shares of Diagnostek during the period from
April 3, 1995, through and including July 28, 1995. Fact discovery in the
consolidated lawsuit is complete. Expert discovery is expected to be completed
and dispositive motions are expected to be filed over the next several months.
No trial date has been set.
In connection with the Acquisition, Columbia has agreed to defend and hold
the Company and its affiliates (including VHI) harmless from and against any
liability that may arise in connection with either of the foregoing proceedings.
Consequently, the Company does not believe it will incur any material liability
in connection with the foregoing matters.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Index to Exhibits on page 20.
(b) Reports on Form 8-K.
(i) On February 10, 2000, we filed a Current Report on
Form 8-K dated January 26, 2000 under Items 5 and 7,
regarding a press release we issued concerning the
election of five members to our board of directors.
(ii) On February 10, 2000, we filed a Current Report on
Form 8-K, dated February 9, 2000 under Items 5 and 7,
regarding a press release we issued concerning our
year end 1999 financial performance.
(iii)On March 3, 2000, we filed a Current Report on Form
8-K, dated March 2, 2000 under Item 5 regarding a Dow
Jones news wire issued concerning our amended
relationship with Aetna US Healthcare, Inc.
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: May 8, 2000 By: /s/ Barrett A. Toan
---------------------------
Barrett A. Toan, President and
Chief Executive Officer
Date: May 8, 2000 By: /s/ George Paz
---------------------------
George Paz, Senior Vice
President and Chief
Financial Officer
INDEX TO EXHIBITS
(Express Scripts, Inc. - Commission File Number 0-20199)
Exhibit
Number Exhibit
2.1** Stock Purchase Agreement by and among SmithKline Beecham
Corporation, SmithKline Beecham InterCredit BV and Express
Scripts, Inc., dated as of February 9, 1999, and certain related
Schedules, incorporated by reference to Exhibit No. 2.1 to the
Company's Current Report on Form 8-K filed February 18, 1999.
2.2 Asset Contribution and Reorganization Agreement dated August 31, 1999 by
and among PlanetRx.com, Inc., PRX Holdings, Inc., PRX Acquisition, Corp.,
YourPharmacy.com, Inc., and Express Scripts, Inc. (incorporated by
reference to the Exhibit No. 2.1 to PlanetRx's Registration Statement on
Form S-1, as amended (Registration Number 333-82485)).
3.1 Certificate of Incorporation of the Company, as amended,
incorporated by reference to Exhibit No. 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ending June 30,
1999.
3.2 Second Amended and Restated Bylaws, incorporated by reference to
Exhibit No. 3.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ending September 30, 1998.
4.1 Form of Certificate for Class A Common Stock, incorporated by reference
to Exhibit No. 4.1 to the Company's Registration Statement on Form S-1
filed June 9, 1992 (No. 33-46974) (the "Registration Statement").
4.2 Indenture, dated as of June 16, 1999, among the Company, Bankers
Trust Company, as trustee, and Guarantors named therein,
incorporated by reference to Exhibit No. 4.4 to the Company's
Registration Statement on Form S-4 filed August 4, 1999 (No.
333-83133) (the "S-4 Registration Statement").
4.3 Supplemental Indenture, dated as of October 6, 1999, to
Indenture dated as of June 16, 1999, among the Company, Bankers
Trust Company, as trustee, and Guarantors named therein,
incorporated by reference to Exhibit No. 4.3 to the Company's
Annual Report on Form 10-K for the year ending December 31,
1999.
27.1* Financial Data Schedule (provided for the information of the U.S.
Securities and Exchange Commission only).
* Filed herein.
** The Company agrees to furnish supplementally a copy of any omitted schedule
to this agreement to the Commission upon request.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000885721
<NAME> Express Scripts, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 131,547
<SECURITIES> 0
<RECEIVABLES> 738,133
<ALLOWANCES> 17,546
<INVENTORY> 77,426
<CURRENT-ASSETS> 959,464
<PP&E> 158,902
<DEPRECIATION> 54,686
<TOTAL-ASSETS> 2,301,063
<CURRENT-LIABILITIES> 1,004,370
<BONDS> 605,839
0
0
<COMMON> 390
<OTHER-SE> 658,546
<TOTAL-LIABILITY-AND-EQUITY> 2,301,063
<SALES> 1,472,540
<TOTAL-REVENUES> 1,475,509
<CGS> 1,343,063
<TOTAL-COSTS> 1,426,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,201
<INCOME-PRETAX> 36,255
<INCOME-TAX> 14,823
<INCOME-CONTINUING> 21,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,432
<EPS-BASIC> 0.56
<EPS-DILUTED> 0.55
</TABLE>
