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Express Scripts 2009 Annual Report
through internally generated cash and temporary borrowings under the revolving credit facility. This acquisition is
reported as part of our PBM segment.
The purchase price was allocated based upon the estimated fair value of net assets acquired at the date of
the acquisition. A portion of the excess of purchase price over tangible net assets acquired has been allocated to
intangible assets, consisting of customer relationships in the amount of $28.9 million and internally developed
software in the amount of $1.2 million, which are being amortized using a straight-line method over estimated useful
lives of 15 years and 5 years, respectively. The acquired customer relationships and internally developed software
are included in other intangibles, net and property and equipment, net, respectively, in the consolidated balance
sheet. In addition, the excess of purchase price over tangible net assets and identified intangible assets acquired has
been allocated to goodwill in the amount of $194.6 million. The preliminary allocation of $208.2 million at
December 31, 2008 was reduced due to costs identified within one year of the acquisition date. Goodwill related to
this acquisition is not deductible for tax purposes.
On October 10, 2007, we purchased Connect Your Care, LLC (“CYC”), a leading provider of consumer
directed healthcare technology solutions to the employer, health plan and financial services markets. The purchase
price was funded through internally generated cash. The purchase agreement includes an earnout provision, payable
after three years based on the performance of the business. This acquisition is reported as part of our EM segment,
and did not have a material effect on our consolidated financial statements.
4. Discontinued operations
On June 30, 2008, we completed the sale of IP, our infusion pharmacy line of business, for $27.5 million
and recorded a pre-tax gain of approximately $7.4 million. The gain is included in net loss from discontinued
operations, net of tax in the consolidated statement of operations for the year ended December 31, 2008. Rights to
certain working capital balances related to IP were not sold and are retained on the balance sheet as of
December 31, 2009. For a period of time, we will continue to generate cash flows and income statement activity on
assets and liabilities of discontinued operations as these working capital balances wind down, which are not
expected to be material.
IP was identified as available for sale during the fourth quarter of 2007 as we considered it non-core to our
future operations. In connection with the classification of IP as a discontinued operation, we recorded a charge of
$34.0 million in the fourth quarter of 2007 related to impairment losses. IP was headquartered in Louisville,
Kentucky and operated twelve infusion pharmacies in six states. IP offered a broad range of infused therapies in the
home to patients with acute or chronic conditions.
Prior to being classified as a discontinued operation, IP was included in our former SAAS segment. The
results of operations for IP are reported as discontinued operations for all periods presented in the accompanying
consolidated statements of operations. Additionally, for all periods presented, assets and liabilities of the
discontinued operations are segregated in the accompanying consolidated balance sheets, and cash flows of our
discontinued operations are segregated in our accompanying consolidated statement of cash flows.
On April 4, 2008, we completed the sale of CMP and recorded a pre-tax loss of approximately $1.3 million
which is included in net loss from discontinued operations, net of tax in the consolidated statement of operations for
the year ended December 31, 2008. CMP, which assembles customer medical kits containing various types of
medical supplies, was included in our former SAAS segment prior to being classified as a discontinued operation.
Certain information with respect to the discontinued operations for the year ended December 31, 2009,
2008, and 2007 is summarized as follows:
(in millions)
2009
2008
2007
Revenues
$ -
$ 44.7
$ 108.3
Net income (loss) from discontinued operations, net of tax
1.1
(3.5)
(32.7)
Income tax (expense) benefit from discontinued operations
(0.8)
(0.3)
14.0
72