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AR12
2012 Annual Report

Table of contents

  • Page 1
    AR12 2012 Annual Report

  • Page 2
    .... Headquartered in St. Louis, Express Scripts provides integrated pharmacy benefit management services, including network-pharmacy claims processing, home delivery, specialty benefit management, benefit-design consultation, drug-utilization review, formulary management, and medical and drug data...

  • Page 3
    ... File Number: 1-35490 EXPRESS SCRIPTS HOLDING COMPANY (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) One Express Way, St. Louis, MO (Address of principal executive offices) 45-2884094 (I.R.S. Employer Identification...

  • Page 4
    ... to health benefit providers promoting the use of generics and low-cost brands offering cost-effective home delivery pharmacy and specialty services which result in drug cost savings for plan sponsors and co-payment savings for members We work with clients, manufacturers, pharmacists and physicians...

  • Page 5
    ... distribution services, comprised the remainder of our revenues. Prescription drugs are dispensed to members of the health plans we serve primarily through networks of retail pharmacies that are under non-exclusive contracts with us and through home delivery fulfillment pharmacies, specialty drug...

  • Page 6
    ... for the Medicare Part D Prescription Drug Program. All retail pharmacies in our pharmacy networks communicate with us online and in real time to process prescription drug claims. When a member of a plan presents his or her identification card at a network pharmacy, the network pharmacist sends...

  • Page 7
    ... using prescription services and a variety of member communications related to their prescription benefit. We also offer an individual prescription drug plan which is offered to beneficiaries in all 34 Medicare regions across the U.S., as well as Puerto Rico. Express Scripts 2012 Annual Report 5

  • Page 8
    ... participants to purchase generic pharmaceuticals and related goods and services from pharmaceutical manufacturers and suppliers, as well as providing strategic analysis and advice regarding pharmacy procurement contracts for the purchase and sale of goods and services. 6 Express Scripts 2012 Annual...

  • Page 9
    ... management approach to manage care by fully integrating precertification, case management and discharge planning services for patients. We assist with eligibility review, prior authorization coordination, re-pricing, utilization management, monitoring and reporting. 6 Express Scripts 2012 Annual...

  • Page 10
    ...their dependents. Under the contract, we provide online claims adjudication, home delivery services, specialty pharmacy clinical services, claims processing and contact center support, and other services critical to managing pharmacy trend. In December 2009, ESI completed the purchase of 100% of the...

  • Page 11
    ..., formulary management and medical and drug-data analysis services. In December 2011, we launched an active PBM service in Canada, which included home delivery of maintenance prescription medications from a Member Contact Center and regional dispensing pharmacies four locations. Sales and Marketing...

  • Page 12
    ... are shared at our annual Outcomes Conference and are available on our website. We also present at other client forums, speak at professional meetings and publish in health-related journals. Information Technology. Our Information Technology department supports our pharmacy claims processing systems...

  • Page 13
    ...Medco Containment Life Insurance Company of New York), we operate as Part D PDP sponsors offering PDP coverage and services to our clients and Part D beneficiaries. We also, through our core PBM business, provide Part D-related products and services to other PDP sponsors, MA-PDPs and other employers...

  • Page 14
    ... for direct and indirect compensation received by plan service providers such as PBMs. However, on February 4, 2010, the DOL issued two frequently asked questions that provide that discount and rebate revenue paid to PBMs by drug manufacturers generally need not be reported on a plan's Form 5500...

  • Page 15
    ...use non-network providers. Other states have enacted legislation purporting to prohibit health plans from offering members financial incentives for use of home delivery pharmacies. Legislation has been introduced in some states to prohibit or restrict therapeutic intervention, or to require coverage...

  • Page 16
    ... management. In addition, accreditation agencies' requirements for managed care organizations such as the National Committee on Quality Assurance and Medicare Part D regulations for PDP and MA-PDPs may affect the services we provide to such organizations. 14 Express Scripts 2012 Annual Report

  • Page 17
    ...MY RX CHOICES®" and "RATIONALMED®" with the United States Patent and Trademark Office. Our rights to these marks will continue so long as we comply with the usage, renewal filings and other legal requirements relating to the usage and renewal of service marks. Express Scripts 2012 Annual Report 15

  • Page 18
    .... Prior to joining us, Mr. Hall worked for KLA-Tencor, a leading supplier of process control and yield management solutions. Mr. Hall joined KLATencor in January 2000, serving in various positions including Senior Vice President and Chief Financial Officer. 15 16 Express Scripts 2012 Annual Report

  • Page 19
    ... to execute on, or other issues arising under, certain key client contracts Q changes relating to our participation in Medicare Part D, the loss of Medicare Part D eligible members, or our failure to otherwise execute on our strategies related to Medicare Part D Express Scripts 2012 Annual Report...

  • Page 20
    ...pharmaceutical manufacturers with clients. Increased client demand for lower pricing, increased revenue sharing, enhanced service offerings and higher service levels create pressure on our operating margins. We cannot assume that positive trends such as lower drug purchasing costs, increased generic...

  • Page 21
    ... antitrust laws related to our pharmacy, pharmaceutical manufacturer and client relationships international laws These and other regulatory matters are discussed in more detail under "Part I - Item 1 - Business - Government Regulation and Compliance" above. Express Scripts 2012 Annual Report 19

  • Page 22
    ... "single-payer" government funded healthcare, changes in reimbursement rates, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls on prescription drugs and other significant healthcare reform proposals. We are...

  • Page 23
    ...clients to report certain types of PBM proprietary information various health insurance taxes and fees changes to the calculation of average manufacturer price ("AMP") of drugs and an increase in the rebate amounts drug manufacturers must pay to states for drugs reimbursed by state Medicaid programs...

  • Page 24
    ... making employer/union-only group waiver plans available for eligible clients and Medco's insurance subsidiaries have been approved by CMS to participate in the Medicare Part D program as a national PDP sponsor that provides direct services to Medicare Part D eligible members. We also provide other...

  • Page 25
    ... benefits. Further, we have incurred and will continue to incur significant costs in connection with the integration process. The substantial majority of these costs are non-recurring expenses related to the facilities and systems consolidation costs. Express Scripts 2012 Annual Report 23

  • Page 26
    ... to our business operations or negative impacts to patient safety, customer and member disputes, damage to our reputation, exposures to risk of loss, litigation or regulatory violations, increased administrative expenses or other adverse consequences. 24 Express Scripts 2012 Annual Report

  • Page 27
    ...from our home delivery pharmacies and through pharmacies in our retail networks administrative fees for managing rebate programs, including the development and maintenance of formularies which include the particular manufacturer's products access to limited distribution specialty pharmaceuticals If...

  • Page 28
    ... claims. A claim, or claims, in excess of our insurance coverage could have a material adverse effect on our business and results of operations. We face significant competition in attracting and retaining talented employees. Further, managing succession and retention for our Chief Executive Officer...

  • Page 29
    Item 1B - Unresolved Staff Comments There are no unresolved written comments that were received from the SEC Staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934. Express Scripts 2012 Annual Report 27

  • Page 30
    ... St. Louis, Missouri facility houses our corporate headquarters offices and accommodates our executive and corporate functions. Our PBM home delivery pharmacy operations consist of 14 prescription order processing pharmacies that are located throughout the United States, 8 contact centers and 8 mail...

  • Page 31
    ... Northern District of New York) (filed February 18, 2008) . Under these cases, the plaintiffs assert that certain of the business practices of Express Scripts, Inc. and its subsidiaries ("ESI"), including those relating to ESI's contracts with pharmaceutical manufacturers for retrospective discounts...

  • Page 32
    ... its market share and artificially reduced the level of reimbursement to the retail pharmacy class members and that the prices of prescription drugs from Merck and other pharmaceutical manufacturers that do business with Medco were fixed above competitive levels. Plaintiffs assert claims for...

  • Page 33
    .... Q National Association of Chain Drug Stores, et al. v. Express Scripts, Inc. and Medco Health Solutions, Inc. (Case No. 2:05-mc-02025, United States District Court for the Western District of Pennsylvania). On March 29, 2012, two pharmacy trade groups and several retail pharmacies filed a lawsuit...

  • Page 34
    ...experience. It is not possible to predict with certainty the outcome of these claims, and we can give no assurance that any losses in excess of our insurance and any self-insurance accruals will not be material. Item 4 - Mine Safety Disclosures Not applicable. 32 Express Scripts 2012 Annual Report

  • Page 35
    ...high and low prices, as reported by the Nasdaq, are set forth below for the periods indicated. Note that prices for the period before April 2, 2012 relate to the common stock of ESI and the prices for the period after April 2, 2012 relate to the common stock of Express Scripts. Fiscal Year 2012 High...

  • Page 36
    ...to Express Scripts shareholders Balance Sheet Data (as of December 31): Cash and cash equivalents Working (deficit) capital Total assets Debt: Short-term debt Long-term debt Stockholders' equity Network pharmacy claims processed(7)(8) Home delivery, specialty pharmacy, and other prescriptions filled...

  • Page 37
    ...client's formulary. (9) These claims include home delivery, specialty and other claims including: (a) drugs distributed through patient assistance programs; (b) drugs we distribute to other PBMs' clients under limited distribution contracts with pharmaceutical manufacturers; and (c) FreedomFP claims...

  • Page 38
    ... network claims processing, home delivery services, patient care and direct specialty home delivery to patients, benefit plan design consultation, drug utilization review, formulary management, drug data analysis services, distribution of injectable drugs to patient homes and physician offices...

  • Page 39
    ...of our business one level below the segment level. Our reporting units represent businesses for which discrete financial information is available and reviewed regularly by segment management. In the fourth quarter of 2011, we elected to early adopt new guidance related to goodwill impairment testing...

  • Page 40
    ... at fair market value when acquired using the income method. Customer contracts and relationships related to our 10-year contract with WellPoint, Inc. ("WellPoint") under which we provide pharmacy benefit management services to WellPoint and its designated affiliates ("the PBM agreement") are being...

  • Page 41
    ...clients and rates contracted by us with pharmacies in our retail networks or with pharmaceutical manufacturers for drugs dispensed from our home delivery pharmacies changes in drug utilization patterns, including the mix of brand and generic drugs as well as utilization of our home delivery pharmacy...

  • Page 42
    ... from our home delivery and specialty pharmacies are recorded when prescriptions are shipped. These revenues include the co-payment received from members of the health plans we serve. At the time of shipment, we have performed substantially all of our obligations under the customer contracts and do...

  • Page 43
    ... claims, we record rebates received from manufacturers, net of the portion payable to customers, in revenue. We distribute pharmaceuticals in connection with our management of patient assistance programs and earn a fee from the manufacturer for administrative and pharmacy services for the delivery...

  • Page 44
    ... acquisition of Medco effective April 2, 2012. Includes retail pharmacy co-payments of $11,668.6, $5,786.6 and $6,181.4 for the years ended December 31, 2012, 2011 and 2010, respectively. Includes home delivery, specialty and other claims including: (a) drugs distributed through patient assistance...

  • Page 45
    ... home delivery claims in 2011 compared to 60.2% in 2010. The home delivery generic fill rate is lower than the retail generic fill rate as fewer generic substitutions are available among maintenance medications (e.g., therapies for chronic conditions) commonly dispensed from home delivery pharmacies...

  • Page 46
    ... (EXPENSE) INCOME, NET Net other expense increased $306.2 million, or 106.6%, in 2012 as compared to 2011 due to the following items: $85.2 million of financing fees related to the bridge facility and credit agreement (defined below) and senior note interest 44 Express Scripts 2012 Annual Report

  • Page 47
    ... interest represents the share of net income allocated to members in our consolidated affiliates. Increases in these amounts are primarily driven by activities of this affiliate being in place for the full fiscal year, as well as increased profitability. Express Scripts 2012 Annual Report 45

  • Page 48
    ..., ESI opened a new office facility in St. Louis, Missouri to consolidate our St. Louis presence onto our Headquarters campus. Capital expenditures of approximately $32.0 million and other costs of approximately $1.3 million related to this facility were incurred in 2011. 46 Express Scripts 2012...

  • Page 49
    ... our cash flow needs. ACQUISITIONS AND RELATED TRANSACTIONS As a result of the Merger on April 2, 2012, Medco and ESI each became 100% owned subsidiaries of Express Scripts and former Medco and ESI stockholders became owners of stock in Express Scripts, which is listed on the Nasdaq stock exchange...

  • Page 50
    ...million shares received under the agreement. See Note 9 - Common stock for more information on the terms of the ASR agreement. SENIOR NOTES Following the consummation of the Merger on April 2, 2012, several series of senior notes issued by Medco are reported as debt obligations of Express Scripts on...

  • Page 51
    ... billion, 5-year senior unsecured revolving credit facility. The facility was due to mature on April 30, 2012. Medco refinanced the $2.0 billion senior unsecured revolving credit facility on January 23, 2012. Upon completion of the Merger, the $1.0 billion 48 Express Scripts 2012 Annual Report 49

  • Page 52
    ... on the five-year credit facility. ACCOUNTS RECEIVABLE FINANCING FACILITY Upon consummation of the Merger, Express Scripts assumed a $600 million, 364-day renewable accounts receivable financing facility that was collateralized by Medco's pharmaceutical manufacturer rebates accounts receivable. On...

  • Page 53
    ... of our contracts provide that we bill clients based on a generally recognized price index for pharmaceuticals. Item 7A - Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in interest rates related to debt outstanding under our credit facility. Our...

  • Page 54
    ..., the financial position of Express Scripts Holding Company and its subsidiaries at December 31, 2012 and December 31, 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally...

  • Page 55
    ... outstanding: 818.1 and 484.6, respectively Additional paid-in capital Accumulated other comprehensive income Retained earnings Common stock in treasury at cost, zero and 206.1 shares, respectively Total Express Scripts stockholders' equity Non-controlling interest Total stockholders' equity Total...

  • Page 56
    ...312.9 $ 1,275.8 $ 1,275.8 $ 1,204.6 (23.4) $ 1,181.2 (1) Includes retail pharmacy co-payments of $11,668.6, $5,786.6 and $6,181.4 for the years ended December 31, 2012, 2011 and 2010, respectively. See accompanying Notes to Consolidated Financial Statements 54 Express Scripts 2012 Annual Report

  • Page 57
    ..., net of tax: Foreign currency translation adjustment Comprehensive income Less: Comprehensive income attributable to non-controlling interests Comprehensive income attributable to Express Scripts See accompanying Notes to Consolidated Financial Statements Express Scripts 2012 Annual Report 55

  • Page 58
    ... in form of dividend Treasury stock acquired Common stock issued under employee plans, net of forfeitures and stock redeemed for taxes Amortization of unearned compensation under employee plans Exercise of stock options Tax benefit relating to employee stock compensation Balance at December 31, 2010...

  • Page 59
    ... facility Excess tax benefit relating to employee stock-based compensation Net proceeds from employee stock plans Deferred financing fees Treasury stock acquired Distributions paid to non-controlling interest Other Net cash provided by (used in) financing activities-continuing operations Net cash...

  • Page 60
    ... network claims processing, home delivery pharmacy services, benefit design consultation, drug utilization review, drug formulary management, compliance and therapy management programs, Medicare Part D and Medicaid products, distribution of injectable drugs to patient homes and physician offices...

  • Page 61
    ...have failed. Our allowance for doubtful accounts also reflects amounts associated with member premiums for the Company's Medicare Part D product offerings and amounts for certain supplies reimbursed by government agencies and insurance companies. We regularly review and analyze the adequacy of these...

  • Page 62
    ... value, which is based upon quoted market prices, with unrealized holding gains and losses reported through other comprehensive income, net of applicable taxes. We held no securities classified as available for sale at December 31, 2012 or 2011. Impairment of long-lived assets. We evaluate whether...

  • Page 63
    ... at fair market value when acquired using the income method. Customer contracts and relationships related to our 10-year contract with WellPoint, Inc. ("WellPoint") under which we provide pharmacy benefit management services to WellPoint and its designated affiliates ("the PBM agreement") are being...

  • Page 64
    ...for administrative and pharmacy services for the delivery of certain drugs free of charge to doctors for their low-income patients. These revenues include administrative fees received from these programs. Revenues related to the distribution of prescription drugs by retail pharmacies in our networks...

  • Page 65
    ... customer contracts related to the PBM agreement has been included as an offset to revenue in the amount of $114.0 million for each of the years ended December 31, 2012, 2011 and 2010. Revenues from our Other Business Operations segment are earned from the distribution of pharmaceuticals and medical...

  • Page 66
    ...co-payments derived from providing Pharmacy Benefit Management ("PBM") services, a component of revenues on the consolidated statement of operations. Our cost of revenues includes the cost of drugs dispensed by our home delivery pharmacies or retail network for members covered under our Medicare PDP...

  • Page 67
    ... for the years ended December 31, 2012, 2011 and 2010, respectively. These were excluded because their effect was anti-dilutive. Foreign currency translation. The financial statements of our foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for...

  • Page 68
    ... effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We elected to early adopt the guidance as permitted by the new standard. Adoption of the standard did not have a material impact on our financial position, results of operations...

  • Page 69
    ... Merger Agreement, upon consummation of the Merger on April 2, 2012, each share of Medco common stock was converted into (i) the right to receive $28.80 in cash, without interest and (ii) 0.81 shares of Express Scripts stock. Holders of Medco stock options, restricted stock units and deferred stock...

  • Page 70
    ...days ending with the fourth complete trading day prior to the completion of the Merger. Based on the opening price of Express Scripts' stock on April 2, 2012, the purchase price was comprised of the following: (in millions) Cash paid to Medco stockholders(1) $ Value of shares of common stock issued...

  • Page 71
    ... 2, 2012, we acquired the receivables of Medco. The gross contractual amounts receivable and fair value of these receivables as of the acquisition date are shown below. Of the gross amounts due under the contracts as of the date of acquisition, we estimated $43.6 million related to client accounts...

  • Page 72
    ... Business Operations segment. Liberty sells diabetes testing supplies and is located in Port St. Lucie, Florida. Express Scripts will work as a back-end pharmacy supplier for portions of the Liberty business for a minimum of two years. Therefore, the Company will retain cash flows associated with...

  • Page 73
    ... operations during the third quarter of 2010 totaled $8.3 million. These charges are included in the "Net loss from discontinued operations, net of tax" line item in the accompanying consolidated statement of operations for the year ended December 31, 2010. Express Scripts 2012 Annual Report...

  • Page 74
    ...remain operational. Based on our assessments of potential use and our intent for this location, we consider the Bensalem dispensing pharmacy facility to be temporarily idle, and have not modified the method or useful life used to depreciate the related assets. 72 Express Scripts 2012 Annual Report

  • Page 75
    ... in the consolidated statement of operations, related to the termination or partial termination of bridge loan financing in connection with business combinations in process during each respective period. Additionally, in accordance with applicable accounting 72 Express Scripts 2012 Annual Report 73

  • Page 76
    ... $114.0 million for customer contracts related to the PBM agreement has been included as an offset to revenues for each of the years ended December 31, 2012, 2011 and 2010. The future aggregate amount of amortization expense of other intangible assets for our continuing operations is expected to be...

  • Page 77
    ... of the cash consideration paid in connection with the Merger (as discussed in Note 3 - Changes in business), to repay existing indebtedness and to pay related fees and expenses. Subsequent to consummation of the Merger on April 2, 2012, the new revolving facility is available for general corporate...

  • Page 78
    ... by Medco's pharmaceutical manufacturer rebates accounts receivable. On September 21, 2012, Express Scripts terminated the facility and repaid all amounts drawn down. INTEREST RATE SWAP Medco entered into five interest rate swap agreements in 2004. These swap agreements, in effect, converted...

  • Page 79
    ... on the notes being redeemed accrued to the redemption date. The September 2010 Senior Notes, issued by Medco, are jointly and severally and fully and unconditionally (subject to certain customary release provisions, including sale, exchange, transfer or 76 Express Scripts 2012 Annual Report 77

  • Page 80
    ... 15. The net proceeds were used to pay a portion of the cash consideration paid in the Merger and to pay related fees and expenses (see Note 3 - Changes in business). We may redeem some or all of each series of November 2011 Senior Notes prior to maturity at a price equal to the greater of (1) 100...

  • Page 81
    ... date. The February 2012 Senior Notes, issued by Express Scripts, are jointly and severally and fully and unconditionally (subject to certain customary release provisions, including sale, exchange, transfer or liquidation of the guarantor subsidiary) guaranteed on a senior unsecured basis by ESI...

  • Page 82
    ... and 35.5% for the years ended December 31, 2012 and 2010, respectively. There were no discontinued operations in 2011. Our 2012 net tax provision from discontinued operations was $12.2 million, with a corresponding net tax benefit of $12.9 million in 2010. 80 Express Scripts 2012 Annual Report

  • Page 83
    ... or expected to be taken in our tax returns. The Internal Revenue Service ("IRS") is examining the consolidated 2008 and 2009 U.S. federal income tax returns for both ESI and Medco. In addition, during 2012, the IRS commenced an examination of Medco's 2010 Express Scripts 2012 Annual Report 81

  • Page 84
    ..., ESI's Board of Directors adopted a stockholder rights plan which declared a dividend of one right for each outstanding share of ESI's common stock. The rights plan expired on March 15, 2011 and no additional plan has been adopted by the Board of Directors. 82 Express Scripts 2012 Annual Report

  • Page 85
    ..., 2012 is the result of contributions to the Medco 401(k) Plan from the date of the Merger. Employee stock purchase plan. We offer an employee stock purchase plan that qualifies under Section 423 of the Internal Revenue Code and permits all employees, excluding certain management level employees, to...

  • Page 86
    ... related to employee stock compensation recognized during the years ended December 31, 2012, 2011 and 2010 was $153.9 million, $17.7 million and $18.1 million, respectively. Effective upon the closing of the Merger, the Company assumed the sponsorship of the Medco Health Solutions, Inc. 2002 Stock...

  • Page 87
    ... of the Merger at a 1:1 ratio. For the year ended December 31, 2012, the windfall tax benefit related to stock options exercised during the year was $45.3 million and is classified as a financing cash inflow on the consolidated statement of cash flows. Express Scripts 2012 Annual Report 85

  • Page 88
    ... to new entrants since February 28, 2011. However, account balances continue to be credited with interest until paid. Medco's unfunded postretirement healthcare benefit plan was discontinued for all active non-retirement eligible employees in January 2011. 86 Express Scripts 2012 Annual Report

  • Page 89
    ... the year ended December 31, 2012 is as follows: Other Postretirement Benefits $ 0.5 (0.5) 2.9 0.1 0.1 (0.5) 2.6 $ 2.6 (in millions) Fair value of plan assets at beginning of year Fair value of plan assets assumed in the Merger Actual return on plan assets Company contributions Benefits paid Fair...

  • Page 90
    ... For the other postretirement benefit plan, the discount rate is determined annually and is evaluated and modified to reflect, at the end of our fiscal year, the prevailing market rate of a portfolio of high-quality corporate bond investments that would provide the future cash flows needed to settle...

  • Page 91
    ... at the readily available quoted price from an active market where there is significant transparency in the executed quoted price. These investments consist of mutual funds valued at the net asset value of shares held by the pension plan at year-end. Assets classified as Level 2 include units held...

  • Page 92
    ... Lease Payments $ 13.7 13.7 13.6 13.6 $ 54.6 Year Ended December 31, 2013 2014 2015 2016 2017 Thereafter Total In the fourth quarter of 2011, ESI opened a new office facility in St. Louis, Missouri to consolidate our St. Louis presence onto our Headquarters campus. The annual lease commitments...

  • Page 93
    ... material. 13. Segment information We report segments on the basis of services offered and have determined we have two reportable segments: PBM and Other Business Operations. During the second quarter of 2012, we reorganized our international retail network pharmacy management business (which has...

  • Page 94
    ...Network revenues Home delivery and specialty revenues Other revenues Service revenues Total revenues Depreciation and amortization expense Operating income Interest income Interest expense and other Income before income taxes Capital expenditures 2010 Product revenues: Network revenues Home delivery...

  • Page 95
    ... fees associated with the administration of retail pharmacy networks contracted by certain clients, informed decision counseling services and specialty distribution services. Other Business Operations service revenues include revenues from healthcare card administration through September 14, 2012...

  • Page 96
    ...net of tax Discontinued operations, net of tax Net income attributable to Express Scripts shareholders 0.55 0.55 $ 0.18 0.18 $ 0.49 (0.02) 0.47 $ 0.62 (0.01) 0.61 $ $ 267.8 267.8 $ $ 150.0 $ (0.4) 149.6 $ 406.8 (15.4) 391.4 $ $ 515.9 (11.8) 504.1 94 Express Scripts 2012 Annual Report

  • Page 97
    ... unaudited quarterly financial data. The result of this adjustment revises SG&A, Operating Income, Net Income, and basic and diluted earnings per share for the three months ended June 30, 2012, as reflected above. Includes the April 2, 2012 acquisition of Medco. Includes retail pharmacy co-payments...

  • Page 98
    ...all such immaterial errors. Because ESI was the Company's predecessor for financial reporting purposes before the acquisition of Medco, the condensed consolidating financial information for the years ended December 31, 2011 and 2010 represents the results of ESI and its subsidiaries. The errors were...

  • Page 99
    ...reflect Express Scripts Holding Company as the Parent Company effective with the Merger and reorganization of the Company during the quarter ended June 30, 2012. (v) With respect to the condensed consolidating statement of cash flows for the years ended December 31, 2011 and 2010, amounts related to...

  • Page 100
    ...liabilities of discontinued operations Non-controlling interest Express Scripts stockholders' equity Total liabilities and stockholders' equity Express Scripts Holding Company $ 31,375.6 2,189.0 67.1 $ $ 33,631.7 62.9 631.6 694.5 9,552.2 23,385.0 $ 33,631.7 $ $ $ Medco Health Solutions, Inc. $ 2,330...

  • Page 101
    ... taxes Other liabilities Non-controlling interest Express Scripts stockholders' equity Total liabilities and stockholders' equity Express Scripts Holding Company $ 542.6 5,988.4 29.2 6,560.2 4,086.5 2,473.7 $ 6,560.2 $ Medco Health Solutions, Inc. $ $ $ $ Express Scripts, Inc. $ 5,522.2 1,289...

  • Page 102
    ...Operations Express Medco Scripts Health Holding Express Solutions, Non(in millions) Company Scripts, Inc. Inc. Guarantors Guarantors Eliminations Consolidated For the year ended December 31, 2012 Revenues...2,027.1 748.6 1,278.5 1,278.5 2.7 1,275.8 (2.8) 1,273.0 100 Express Scripts 2012 Annual Report

  • Page 103
    Condensed Consolidating Statement of Operations Express Scripts Holding Express (in millions) Company Scripts, Inc. For the year ended December 31, 2010 Revenues $ - $ Operating expenses Operating income Interest expense, net Income before income taxes Provision for income taxes Net income (loss) ...

  • Page 104
    ... Statement of Cash Flows Express Scripts Holding (in millions) Company For the year ended December 31, 2012 Net cash flows provided by operating activities Cash flows from investing activities: Acquisitions, net of cash acquired Purchases of property and equipment Proceeds from the sale of business...

  • Page 105
    ... Net cash provided by (used in) financing activities Effect of foreign currency translation adjustment Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Express Scripts, Inc. Medco Health Solutions, Inc...

  • Page 106
    ...Consolidating Statement of Cash Flows Express Scripts Holding (in millions) Company For the year ended December 31, 2010 Net cash flows provided by operating activities Cash flows from investing activities: Purchases of property and equipment Purchase of short-term investments Other Net cash used in...

  • Page 107
    ... the Exchange Act). Under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting...

  • Page 108
    ... officer, principal accounting officer, controller or persons performing similar functions (the "senior financial officers"). A copy of this code of business conduct and ethics is posted on the investor information section of our website at www.express-scripts.com and a print copy is available...

  • Page 109
    ... Company agrees to furnish to the SEC, upon request, copies of any long-term debt instruments that authorize an amount of securities constituting 10% or less of the total assets of Express Scripts Holding Company and its subsidiaries on a consolidated basis. Express Scripts 2012 Annual Report 107

  • Page 110
    ..., thereunto duly authorized. EXPRESS SCRIPTS HOLDING COMPANY February 18, 2013 By: /s/ George Paz George Paz Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 111
    ...2013 Seymour Sternberg Director February 18, 2013 EXPRESS SCRIPTS HOLDING COMPANY Schedule II - Valuation and Qualifying Accounts and Reserves of Continuing Operations Years Ended December 31, 2012, 2011 and 2010 Col. A (in millions) Col. B Balance at Beginning of Period Col. C Additions Charges...

  • Page 112
    ...on Form 8-K filed September 10, 2010, File No. 001-31312. First Supplemental Indenture, dated as of April 2, 2012, among Medco Health Solutions, Inc., Express Scripts Holding Company, the other subsidiaries of Express Scripts Holding Company party thereto and U.S. Bank Trust National Association, as...

  • Page 113
    ...4.2 to Express Scripts Holding Company's Current Report on Form 8-K filed April 6, 2012. Ninth Supplemental Indenture, dated as of May 29, 2012, among Express Scripts, Inc., Express Scripts Holding Company, Medco Health Solutions, Inc., the other subsidiaries of Express Scripts Holding Company party...

  • Page 114
    ... on Form 8-K filed April 6, 2012. Ninth Supplemental Indenture, dated as of May 29, 2012, among Express Scripts, Inc., Express Scripts Holding Company, Medco Health Solutions, Inc., the other subsidiaries of Express Scripts Holding Company party thereto and Wells Fargo Bank, National Association, as...

  • Page 115
    ...stock by Express Scripts, Inc. under the Express Scripts, Inc. 2000 Long-Term Incentive Plan, incorporated by reference to Exhibit No. 10.7 to Express Scripts, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, File No. 000-20199. Form of Performance Share Award Agreement...

  • Page 116
    .... Executive Deferred Compensation Plan of 2005 (as amended and restated effective April 2, 2012), incorporated by reference to Exhibit 10.3 to Express Scripts Holding Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. Medco Health Solutions, Inc. 2002 Stock Incentive Plan...

  • Page 117
    ... George Paz, as Chairman, President and Chief Executive Officer of Express Scripts Holding Company, pursuant to 18 U.S.C.ss.1350 and Exchange Act Rule 13a-14(b). Certification by Jeffrey Hall, as Executive Vice President and Chief Financial Officer of Express Scripts Holding Company, pursuant to 18...

  • Page 118
    ... Our Common Stock; (2) S&P 500 Index; (3) S&P 500 Healthcare Index. $200 Express Scripts S&P 500 Index S&P 500 - Healthcare $100 $0 2007 2008 2009 2010 2011 2012 Years Ending Total Return to Stockholders (Dividends reinvested monthly) Base Period Company/Index Dec-07 Express Scripts 100 S&P 500...

  • Page 119
    ... Market Street St. Louis, MO 63101 Investor Relations Contact | 314.810.3115 | [email protected] Board of Directors Gary G. Benanav 1,4 Director Retired Vice Chairman, New York Life Insurance Company Frank Mergenthaler 2 Director, Chairman of the Audit Committee Executive...

  • Page 120
    ...Forest Stewardship CouncilTM (FSC®). The cover and financials are printed on paper stock that has 10% post-consumer waste content (PCW). Express Scripts One Express Way St. Louis, Missouri 63121 Express-Scripts.com © 2013 Express Scripts Holding Company. All Rights Reserved. 12-1169 ® UFCW888