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Express Scripts 2012 Annual Report70
During the second quarter of 2010, ESI recorded a pre-tax benefit of $30.0 million related to the
amendment of a client contract which relieved us of certain contractual guarantees. This amount was originally
accrued in the NextRx opening balance sheet. In accordance with business combination accounting guidance, the
reversal of the accrual was recorded in revenue, since it relates to client guarantees, upon amendment of the contract
during the second quarter of 2010.
4. Dispositions
During 2012, we determined various businesses were no longer core to our future operations and
committed to a plan to dispose of these businesses. As a result, we sold EAV, Liberty, and CYC. In accordance with
applicable accounting guidance, we have also determined portions of our UBC line of business and our European
operations to be classified as held for sale. Prior to the sales of EAV and Liberty, goodwill and intangible
impairment charges were recorded. Below is a summary of 2012 charges associated with these businesses and the
impact to our consolidated statement of operations:
(in millions)
Gain
recorded
upon sale
Goodwill &
Intangible
Impairments
EAV
$
3.7
$
(11.5)
Recorded in net loss from discontinued operations, net of tax
$
3.7
$
(11.5)
Liberty
$
0.5
$
(23.0)
CYC
14.3
-
Recorded in selling, general and administrative
$
14.8
$
(23.0)
Total disposition charges
$
18.5
$
(34.5)
Sale of EAV. On December 4, 2012, we completed the sale of our EAV line of business, which primarily
provided home delivery pharmacy services in Germany. During the fourth quarter of 2012, we recognized a gain on
the sale of this business, net of the sale of its assets, which totaled $3.7 million. The gain is 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, 2012. Prior to being classified as a discontinued operation, EAV was included in our
Other Business Operations segment.
During the third quarter of 2012, the Company determined it was necessary to reassess carrying values of
EAV’s assets and liabilities based on a change in business environment related to an adverse court ruling by the
German high court in August 2012 and the expected disposal for EAV as a result of the ruling. Based on the
assessment, we recorded impairment charges associated with this line of business totaling $11.5 million to reflect
the write-down of $2.0 million of goodwill and $9.5 million of intangible assets. 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, 2012.
The results of operations for EAV are reported as discontinued operations for all periods presented in the
accompanying consolidated statement of operations in accordance with applicable accounting guidance (see select
statement of operations information below). Additionally, for all periods presented, cash flows of our discontinued
operations are segregated in our accompanying consolidated statement of cash flows. As EAV was acquired through
the Merger, no associated assets or liabilities were held as of December 31, 2012 or 2011.
Sale of Liberty. On December 3, 2012, we completed the sale of our Liberty line of business, which is
included within our Other 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 Liberty which preclude
classification of this business as a discontinued operation. During the fourth quarter of 2012, we recognized a gain
on the sale of this business, net of the sale of its assets, which totaled $0.5 million. The gain is included in the
SG&A line item in the accompanying consolidated statement of operations for the year ended December 31, 2012.
In the third quarter of 2012, as a result of our plan to dispose of Liberty, an impairment charge totaling
$23.0 million was recorded against intangible assets. This charge is included in the SG&A line item in the