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Express Scripts 2009 Annual Report
8. Goodwill and Other Intangibles
The following is a summary of our goodwill and other intangible assets (amounts in millions):
December 31, 2009
December 31, 2008
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Goodwill
PBM (1)
$ 5,472.1
$ 107.3
$ 5,364.8
$ 2,833.7
$ 107.0
$ 2,726.7
EM
154.4
-
154.4
154.4
-
154.4
$ 5,626.5
$ 107.3
$ 5,519.2
$ 2,988.1
$ 107.0
$ 2,881.1
Other intangible assets
PBM
Customer contracts(1)
$ 2,018.3
$ 197.8
$ 1,820.5
$ 432.2
$ 159.5
$ 272.7
Other (2)
27.9
10.9
17.0
21.1
13.0
8.1
2,046.2
208.7
1,837.5
453.3
172.5
280.8
EM
Customer relationships
72.4
29.7
42.7
72.4
23.0
49.4
Other
2.4
-
2.4
2.4
-
2.4
74.8
29.7
45.1
74.8
23.0
51.8
Total other intangible assets
$ 2,121.0
$ 238.4
$ 1,882.6
$ 528.1
$ 195.5
$ 332.6
(1) Changes in goodwill and customer contracts are the result of the acquisition of the NextRx PBM Business. See Note 3.
(2) Changes in other intangible assets are a result of long-term financing costs recorded related to the Senior Notes partially offset by the
write-off of fully-amortized contractual assets.
The change in the net carrying value of goodwill by business segment is shown in the following table:
(in millions)
PBM
EM
Total
Balance at December 31, 2007
$
2,540.9
$
154.4
$
2,695.3
Acquisitions1
208.2
-
208.2
Foreign currency translation and other
(22.4)
-
(22.4)
Balance at December 31, 2008
2,726.7
154.4
2,881.1
Acquisitions2
2,686.7
-
2,686.7
Foreign currency translation and other
(48.6)
-
(48.6)
Balance at December 31, 2009
$
5,364.8
$
154.4
$
5,519.2
(1) Represents the acquisition of MSC in July 2008.
(2) Represents the acquisition of NextRx in December 2009.
The aggregate amount of amortization expense of other intangible assets for our continuing operations was
$115.1 million, $36.1 million and $38.8 million for the year ended December 31, 2009, 2008 and 2007, respectively.
Amortization expense for the year ended December 31, 2009 includes $66.3 million of fees incurred, recorded in
interest expense in the consolidated statement of operations, related to the termination of the bridge loan for the
financing of the NextRx acquisition. Additionally, in accordance with applicable accounting guidance, amortization
of $9.5 million for customer contracts related to the PBM agreement has been included as an offset to revenues for
the year ended December 31, 2009. The future aggregate amount of amortization expense of other intangible assets
for our continuing operations is expected to be approximately, $159.7 million for 2010, $157.9 million for 2011,
$157.1 million for 2012, $156.5 million for 2013, and $152.1 million for 2014. The weighted average amortization
period of intangible assets subject to amortization is 15 years in total, and by major intangible class is 5 to 20 years
for customer-related intangibles and 3 to 10 years for other intangible assets.
During the first quarter 2010, we received notification of a client contract loss in one of our smaller EM
lines of business. The client contract will remain in effect through December 31, 2010. We believe this will require
a re-evaluation of the fair value of the business’ assets as compared to the carrying values and there could be an
impairment charge in 2010. As of December 31, 2009, the total assets for this business were $39.8 million which
includes goodwill and intangible assets of $23.9 million (see Note 14).
74