Express Scripts 2011 Annual Report Download - page 49

Express Scripts 2011 Annual Report 47
SG&A for the PBM segment decreased $37.0 million, or 4.1%, in 2010 over 2009 primarily as a result of the
following factors:
Transaction costs of $61.1 million related to the NextRx acquisition incurred in 2009;
Expenses of $35.0 million relating to an accrual for the settlement of a legal matter recorded in the third quarter
of 2009; and
A decrease in bad debt expense of $19.0 million due primarily to improved processes in our specialty pharmacy
line of business in the collection of receivables. As a percent of accounts receivable, our allowance for doubtful
accounts for continuing operations was 3.8% and 3.7% at December 31, 2010 and 2009, respectively.
These decreases were partially offset by increases in employee compensation due to growth mostly as a result of
the acquisition of NextRx;
Integration costs of $28.1 million incurred in 2010 related to the acquisition of NextRx;
Increases in depreciation and amortization of $17.8 million related to the customer contracts acquired with
NextRx, capitalized software and equipment purchased for our Technology and Innovation Center; and
A benefit of $15.0 million in the second quarter of 2009 related to an insurance recovery for previously incurred
litigation costs.
PBM operating income increased $571.1 million, or 38.3%, in 2010 over 2009, based on the various factors
described above.
EM OPERATING INCOME
Year Ended December 31,
(in millions)
2011
2010
2009
(1)
Product revenues
$ 1,279.3
$ 1,153.9
$ 1,073.0
Service revenues
21.3
12.4
12.4
Total EM revenues
1,300.6
1,166.3
1,085.4
Cost of EM revenues
1,249.5
1,128.4
1,047.6
EM gross profit
51.1
37.9
37.8
EM SG&A expenses
28.0
28.5
30.7
EM operating income
$ 23.1
$ 9.4
$ 7.1
(1) Our EM results for the year ended December 31, 2009 has been adjusted for the discontinued operations of PMG.
EM RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2011 vs. 2010
EM operating income increased $13.7 million, or 145.7%, in 2011 over 2010. This increase is due to an increase in
volume across all lines of business within the segment, partially offset by cost inflation.
EM RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2010 vs. 2009
EM operating income increased $2.3 million, or 32.4%, in 2010 over 2009. This increase is due to an increase in
volume in certain segments of our Specialty Distribution line of business, partially offset by cost inflation. Additionally,
efforts to control cost within our EM segment resulted in a decrease in SG&A.
OTHER (EXPENSE) INCOME, NET
Net interest expense increased $125.1 million, or 77.1%, in 2011 as compared to 2010 primarily due to
$75.5 million of financing fees related to the bridge facility and credit agreement (defined below) entered into during the
third quarter of 2011 and interest expense related to the May 2011 Senior Notes and November 2011 Senior Notes (defined
below) issued during the second and fourth quarters of 2011, respectively. These increases were partially offset by the
repayment during 2010 of amounts outstanding under our prior credit facility. Net interest expense decreased $26.9 million,
or 14.2%, in 2010 as compared to 2009 primarily due to fees of $66.3 million we incurred in 2009 related to the termination
of the bridge loan for the financing of the NextRx acquisition, lower weighted average interest rate and lower debt
outstanding on our credit facility, partially offset by interest expense on the June 2009 Senior Notes (defined below).