Express Scripts 2012 Annual Report Download - page 92

Express Scripts 2012 Annual Report90
12. Commitments and contingencies
We have entered into noncancellable agreements to lease certain offices, distribution facilities and
operating equipment with remaining terms from one to ten years. The majority of our lease agreements include
renewal options which would extend the agreements from one to five years. Rental expense under the office and
distribution facilities leases, excluding the discontinued operations of EAV, UBC, Europe and PMG (see Note 4 –
Dispositions), in 2012, 2011 and 2010 was $103.6 million, $30.2 million and $40.3 million, respectively. The future
minimum lease payments due under noncancellable leases, excluding the facilities of the discontinued operations of
our held for sale entities UBC and Europe, are shown below (in millions):
Year Ended December 31,
Minimum Operating
Lease Payments
Minimum Capital
Lease Payments
2013
$ 77.7
$ 13.7
2014
60.7
13.7
2015
40.5
13.6
2016
33.0
13.6
2017
31.3
-
Thereafter
29.1
-
Total
$ 272.3
$ 54.6
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 for this facility are approximately
$3.3 million and the term of the lease is ten years.
In November 2012, we entered into a four-year capital lease for equipment to be used in our Fair Lawn,
New Jersey facility. Prior to January 1, 2013, the Company does not have the right to use the asset and has not
received any services that would result in an obligation. Additionally, the equipment has not been placed into service
at December 31, 2012. As such, no asset or liability has been recorded at December 31, 2012. The lease terminates
in December 2016 and contains an option for the Company to purchase the equipment for one dollar at that time.
For the year ended December 31, 2012, approximately 43.7% of our pharmaceutical purchases were
through two wholesalers, 16.8% through Cardinal Health and 26.9% through AmerisourceBergen. In October 2012,
AmerisourceBergen became our primary wholesaler. We believe other alternative sources are readily available.
Except for customer concentration described in Note 13 – Segment information below, we believe no other
concentration risks exist at December 31, 2012.
As of December 31, 2012, we have certain required future purchase commitments for materials, supplies,
services and fixed assets related to the normal course of business. We do not expect potential payments under these
provisions to materially affect results of operations or financial condition based upon reasonably likely outcomes
derived by reference to historical experience and current business plans. These future purchase commitments (in
millions), excluding the facilities of the discontinued operations of our held for sale entities UBC and Europe, are
summarized below:
Year Ended December 31,
Future
Purchase Commitments
2013
$ 219.2
2014
141.6
2015
80.5
2016
5.0
2017
5.2
Thereafter
-
Total
$ 451.5
In the ordinary course of business there have arisen various legal proceedings, investigations, government
inquiries or claims now pending against us or our subsidiaries, including, but not limited to, those relating to
regulatory, commercial, employment, employee benefits and securities matters. In accordance with applicable
accounting guidance, we record accruals for certain of our outstanding legal proceedings, investigations or claims
when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. We evaluate,
on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any
accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable.