Express Scripts 2009 Annual Report Download - page 55

Express Scripts 2009 Annual Report
53
L
IQUIDITY A
N
D
C
APITAL RE
SOU
R
C
E
S
O
PERATI
NG
C
A
S
H FL
OW
A
N
D
C
APITAL EXPE
N
DIT
U
RE
S
I
n 2009, net cash provided by continuing operations increased $
662
.0
m
illion to $1
,
75
7
.6
m
illion. Changes i
n
o
perating cash flows from continuing operations in 2009 were positively impacted by the following factors
:
Net income from continuing operations increased $
4
6.
9
m
illion in 2009 over 2008
.
I
n
c
l
uded
in n
e
t in
co
m
e
ar
e
n
on
-
c
ash charges
of
$
109.9 million related to depreciation and amortization,
$
66
.3
m
illi
o
n r
e
lat
ed
t
o
th
e
w
rit
e
-
off
o
f deferred financing fees
,
and $51.5 million related to deferred income taxe
s
.
The deferred tax provision from conti
n
u
i
ng operations increased $17.7 million 2009 over 2008 reflecting a net
c
hange in taxable temporary differences primarily attributable to tax deductible goodwill
.
C
hanges in working capital from continuing operations resulted in a cash inflow of $
6
31
.4
m
illi
on
i
n 200
9
c
ompared to $93.5 millio
n
i
n 2
008
.
These inflows were primarily related to the collection of receivables fro
m
c
lients and pharmaceutical manufacturers prior to year end, however the offsetting payments
t
o pharmacies and
c
lients were not made until after year end in accordance with the term
s
o
f our client, pharmacy and rebate
c
ontracts. Increases in inventory of $20.1 million for purchases at discounted rates partially offset this cash
i
nfl
ow.
I
n 2009
,
cash flows from disc
o
ntinued operations increased $
6
.
5 million from cash provided of
$
7.4 millio
n
i
n 2008 t
o
c
ash provided of $1
3
.
9 million in 2009
.
This was primarily due to the utilization of a tax benefit in the third quarter of
2009 offset by a decrease in accounts receivable due to the timing of collections as the balances wind down
.
I
n 2008, net cash provided by continuing operations increased $247.5 million to $1
,
095.
6
m
illion. Changes i
n
o
perating cash flows from continuing operations in 2008 were positively impacted by the following factors
:
Net income from continuing op
e
r
ations increased $179.1 million in 2008 over 2007
.
The deferred tax provision from continuing operations increa
s
ed $29.
7
m
illi
on
in
2008 over 2007, reflecting
c
hanges in the deferred tax provision caused by the first quarter 2007 impl
e
me
ntati
o
n
o
f
new
a
cc
o
unting guidanc
e
.
C
hanges in working capital from continuing operations resulted in a cash inflow of $93.5 millio
n
i
n 2
008
c
ompared to $77.2 millio
n
i
n 200
7
.
The change was driven by a
n
in
c
r
e
a
se
in n
e
t
c
a
s
h infl
ow
fr
om
c
laim
s
an
d
r
ebates payable year over year due to the timing of invoices and payments. This was sig
n
i
ficantly offset b
y
dec
r
e
a
ses
fr
om
i
nventory due to large purchases of inventory at discounted rates and
f
r
o
m a
ccou
nt
s
r
ece
i
v
a
b
l
e
due
t
o the timing of coll
ec
ti
o
n
s.
I
n 2008, cash flows from discontinued operations
i
ncreased $28.
2
m
illion from cash used of $20.8
m
illi
on
i
n 2007
to
c
ash provided of $7.
4
m
illion in 2008. This was primarily due to the sale of IP in 2008 and the collection of accounts
rece
i
v
a
b
l
e.
A
s a percent of accounts receivable, our allowance for doubtful accounts for continuing operations was 3.
7
%
an
d
6.
2
% at December 31
,
20
0
9
an
d
20
0
8
,
respectively. The decrease is primarily due to the increase i
n
t
h
e
a
ccou
nt
s
r
ece
i
v
a
b
l
e
b
alan
ce
fr
om
t
he NextRx acquisition
.
Our capital expenditures increased $63
.6
m
illion
,
o
r
74.1%
,
in 20
0
9
as compared to 20
0
8
,
an
d
i
ncreased $10
.
8
m
illion
,
o
r
1
4.4
%
,
in 20
0
8
as compared to 20
0
7
.
I
n the fourth quarter of 2009,
co
n
s
tr
uc
ti
on
began
o
n a new high volum
e
pharmacy fulfillment facility in St. Louis, Missouri. Capital expenditures related to this facility were $34.
0
m
illi
on
i
n 2009
and we expect approximately $31.0 million of expenditures in 2010.
W
e intend to continue t
o
in
ves
t in i
n
fra
s
tr
uc
t
u
r
e
an
d
tec
h
n
o
logy which we believe will provide efficiencies in operation
s
,
facilitate growth and enhance the ser
v
i
ce we provide
to
ou
r
c
li
e
nt
s.
W
e expect future capital expenditures will be funded primarily from operating cash flow or, to the extent
n
ecessary, with borrowings under our revolving credit facility, discussed below
.
S
T
OC
K REP
U
R
C
HA
S
E PR
OG
RAM (reflecting the tw
o
-
for
-
-
one stock split effective June 22, 2007
)
W
e have a stock repurchase program, originally announced on October 25
,
1996. On July 22, 2
008
,
our Board of
Dir
ec
t
o
r
s
a
u
th
o
riz
ed
t
o
tal
i
ncreases in the program of 15.
0
m
illion shares. Treasury shares are carried at first in, first out
cos
t
.
Th
e
r
e
i
s
n
o
limit
o
n th
e
du
rat
i
on of the program
.
During 2009, we did not repurchase any treasury share
s
.
Th
e
r
e
ar
e
21
.0
m
illion shares remaining under this program
.
A
dditional share repurchases, if any, will be made in such amounts and
at such times as we deem appropriate based upon prevailing market and business condition
s
an
d
o
th
e
r fa
c
t
o
r
s
.