Express Scripts 2013 Annual Report Download

Download and view the complete annual report

Please find the complete 2013 Express Scripts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

2013 ANNUAL REPORT
BETTER DECISIONS. HEALTHIER OUTCOMES.
NOW MORE THAN EVER.

Table of contents

  • Page 1
    B E T T ER D ECISI ON S. H EALTH I ER OU T COM ES. NOW MORE THAN EVER. 2 0 1 3 A N N U A L R E P O RT

  • 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
    ... help patients get the medications they need. After the hard, necessary work to combine Medco and Express Scripts, we pivot to a renewed focus on operational excellence and organic growth. Now with one technology platform, offering the industry's In 2013, we enhanced our specialty pharmacy offering...

  • Page 4
    ...of solutions. No one delivers better service to members. And no company is better positioned to manage the complex future of healthcare than Express Scripts. I hope you share my excitement and I thank you for your continued support. George Paz Chairman and CEO Express Scripts 2013 Annual Report 4

  • Page 5
    ... 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 6
    ... to health benefit providers promoting the use of generics and low-cost brands offering cost-effective home delivery pharmacy and specialty services that result in drug cost savings for plan sponsors and co-payment savings for members We work with clients, manufacturers, pharmacists and physicians...

  • Page 7
    ... of the Merger. Our principal executive offices are located at One Express Way, Saint Louis, Missouri, 63121. Our telephone number is 314.996.0900 and our website is www.express-scripts.com. Information included on our website is not part of this annual report. 7 Express Scripts 2013 Annual Report

  • Page 8
    ...non-dispensing order processing facilities and patient contact centers. We also maintain one non-dispensing home delivery fulfillment pharmacy for business continuity purposes. Our pharmacies provide patients with convenient access to maintenance medications and enable us to manage our clients' drug...

  • Page 9
    ...the pre-enrollment site's Plan Compare tool to accurately project costs for all of their medications. The post-enrollment site allows members who have signed up to receive a Medicare Part D benefit from either Express Scripts or one of our clients to securely manage all aspects of their prescription...

  • Page 10
    ... contracts for the purchase and sale of goods and services. Consumer Health and Drug Information. Express Scripts empowers member decision-making through online and mobile tools that help guide members in making informed drug, pharmacy and health choices. Express Scripts' digital solutions provide...

  • Page 11
    ... benefits management services to members of the affiliated health plans of WellPoint (the "PBM agreement"). Subsequent to this acquisition, we integrated NextRx's PBM clients into our existing systems and operations. Express Scripts provides pharmacy network services and home delivery and specialty...

  • Page 12
    ... non-dispensing order processing centers, patient contact centers, specialty drug pharmacies and fertility pharmacies, and one non-dispensing home delivery pharmacy maintained for business continuity purposes. At our Canadian facilities we provide a full range of integrated PBM services to insurers...

  • Page 13
    ... pharmacy benefit management and evaluates the clinical, economic and member impact of pharmacy benefits. The creation of predictive models and other analytical tools supports the development and improvement of our products and services. The team also produces the Express Scripts Drug Trend Report...

  • Page 14
    .... Through our licensed insurance subsidiaries (i.e., Express Scripts Insurance Company ("ESIC"), Medco Containment Life Insurance Company and Medco Containment Insurance Company of New York), we operate as Part D PDP sponsors offering PDP coverage and services to our clients and Part D beneficiaries...

  • Page 15
    ... exclusive dealing arrangements. ERISA Regulation. The Employee Retirement Income Security Act of 1974 ("ERISA") regulates certain aspects of employee pension and health benefit plans, including self-funded corporate health plans with respect to which we have agreements to provide PBM services...

  • Page 16
    ...be required to use network providers, but must instead be provided with benefits even if they choose to 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...

  • Page 17
    ...health service plan laws. These may apply, for example, to our licensed Medicare Part D subsidiaries (i.e., ESIC, Medco Containment Life Insurance Company and Medco Containment Insurance Company of New York) and other subsidiary insurance businesses. Pharmacy Regulation. Our home delivery, specialty...

  • Page 18
    ...®" and "EXPRESS ALLIANCE®" 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 2013 Annual Report 18

  • Page 19
    .... A claim, or claims, not covered by insurance or in excess of our insurance coverage could have a material adverse effect on our consolidated results of operations, consolidated financial position and/or consolidated cash flow from operations. Employees As of December 31, 2013 and 2012, we employed...

  • Page 20
    ... Vice President and President, Sales and Account Management. Mr. Wentworth joined Express Scripts when the company merged with Medco in April 2012. At Medco, he served as Group President, National and Key Accounts from October 2008 to April 2012, as Chief Executive Officer of Medco's Accredo Health...

  • Page 21
    ... resources in order to comply or to make significant changes to our business operations changes to the healthcare industry designed to manage healthcare costs or alter healthcare financing practices or changes to government policies in general uncertainties regarding the implementation of Health...

  • Page 22
    ...are generally three years and our pharmaceutical manufacturer and retail contracts are typically non-exclusive and terminable on relatively short notice by either party. Any significant shifts in the structure of the PBM industry or the healthcare products and Express Scripts 2013 Annual Report 22

  • Page 23
    ... clients can design their drug benefit plans various licensure laws, such as managed care and third-party administrator licensure laws drug pricing legislation, including "most favored nation" pricing pharmacy laws and regulations state insurance regulations applicable to our insurance subsidiaries...

  • Page 24
    ...our clients, employers and benefit providers, pharmaceutical manufacturers, healthcare providers and others with whom we do business, including PBM disclosure requirements in the context of Medicare Part D and the Health Insurance Exchanges new federal regulations applicable to health plans offered...

  • Page 25
    ... tax deduction for employers who receive Medicare Part D retiree drug subsidy payments mandated changes to client plan designs changes to certain healthcare fraud and abuse laws The scope and ultimate effect of such provisions on our business remains uncertain and we cannot predict the impact that...

  • Page 26
    ... D prescription drug plan ("PDP") sponsor for the purpose of making employer/union-only group waiver plans available for eligible clients and certain of our insurance subsidiaries have been approved by CMS to participate in the Medicare Part D program as a national PDP sponsor that provides direct...

  • Page 27
    ... of our business, the administration of the Medicare Part D program is complex and any failure to effectively execute the provisions of the Medicare Part D program may have an adverse effect on our financial position results of operations or cash flows. As discussed above, the Health Reform Laws...

  • Page 28
    ... of Express Scripts, Inc. and Medco or uncertainty around realization of the anticipated benefits of the Merger, including the expected amount and timing of cost savings and operating synergies and difficulty in retaining clients of the respective companies, could have a material adverse effect on...

  • Page 29
    ...for drugs we purchase to be dispensed from our home delivery pharmacies rebates based upon distributions of drugs 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...

  • 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 twelve order processing pharmacies that are located throughout the United States, as well as seven contact centers and...

  • Page 31
    ... claims on the cases brought against ESI on behalf of ERISA plans. On February 16, 2010, in accordance with the schedule under the case management order, plaintiffs in the Correction Officers and Lynch matters filed a motion for summary judgment alleging that National Prescription Administrators...

  • Page 32
    ... seek to represent a class of all pharmacies and pharmacists that contracted with Medco and California pharmacies that indirectly purchased prescription drugs from Merck and make factual allegations similar to those in the Alameda Drug Company action discussed below. Plaintiffs assert claims for...

  • Page 33
    ...District Court for the District of New Jersey entered an order granting ESI's and Medco's motions to dismiss Morgan's third amended complaint. On January 6, 2014, Morgan filed a notice of appeal to the United States Court of Appeals for the Third Circuit. • 33 Express Scripts 2013 Annual Report

  • Page 34
    ... Corp., Express Scripts, Medco Health Solutions, Inc., and Walgreens Company (United States District Court for the Southern District of New York, Case No. 1:11-cv-08196-CM) (unsealed January 8, 2014). This qui tam case was filed under seal in April 2013. The federal government intervened against...

  • Page 35
    ... cash dividends in the foreseeable future. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities The following is a summary of our stock repurchasing activity during the three months ended December 31, 2013 (share data in millions): Total number of shares purchased as...

  • Page 36
    ... effect of any additional shares that may be delivered under the 2013 ASR Program). Additional share repurchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions and other factors. Express Scripts 2013 Annual Report...

  • Page 37
    ... line of business, Europa Apotheek Venlo B.V. ("EAV") and our European operations. Discontinued operations as of December 31, 2010 and 2009 include Phoenix Marketing Group ("PMG"). (in millions, except per share data) 2013 2012(1) 2011 2010 2009 (2) Statement of Operations Data (for the Year Ended...

  • Page 38
    ...2010 2009 (2) Balance Sheet Data (as of December 31): Cash and cash equivalents Working (deficit) capital Total assets Debt: Short-term debt Long-term debt Capital lease obligation Stockholders' equity Network pharmacy claims processed-continuing operations(6)(7) Home delivery, specialty pharmacy...

  • Page 39
    ... to Express Scripts per adjusted claim, are affected by the changes in claim volumes between network and home delivery and specialty, the relative representation of brand-name, generic and specialty pharmacy drugs, as well as the level of efficiency in the business. 39 Express Scripts 2013 Annual...

  • Page 40
    ... the administration of retail pharmacy networks contracted by certain clients, medication counseling services and certain specialty distribution services. Tangible product revenue generated by our PBM and Other Business Operations segments represented 98.8% of revenues for the year ended December...

  • Page 41
    ... the Merger. Our results also reflect the successful execution of our business model, which emphasizes the alignment of our financial interests with those of our clients and patients through greater use of generics and low-cost brands, home delivery and specialty pharmacies. We also benefited from...

  • Page 42
    ... of our annual impairment test. However, an impairment charge of $32.9 million was recorded in 2013 based on the contracted sales price of the business (Level 2) associated with our acute infusion therapies line of business due to entering into an agreement for the sale of the business. Our acute...

  • Page 43
    ... between the rates guaranteed by us to 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...

  • Page 44
    ... of drugs dispensed by our home delivery pharmacies or retail network for members covered under our Medicare PDP product offerings and is recorded at cost as incurred. SPECIALTY DRUG REVENUES We operate specialty pharmacies that dispense medications for the treatment of complex and potentially life...

  • Page 45
    ...includes our integrated PBM operations and specialty pharmacy operations. Our Other Business Operations segment includes UBC and our specialty distribution operations. During the second quarter of 2012, we reorganized our other international retail network pharmacy administration business (which was...

  • Page 46
    ... of Medco effective April 2, 2012. (2) Includes retail pharmacy co-payments of $12,620.3, $11,668.6 and $5,786.6 for the years ended December 31, 2013, 2012 and 2011, respectively. (3) Includes home delivery, specialty and other claims including: (a) drugs distributed through patient assistance...

  • Page 47
    ...1, 2012 through April 1, 2012, compared to a full year of operations for 2013. Due to this timing, approximately $5,216.8 million of the increase in home delivery and specialty revenues relates to the acquisition of Medco and inclusion of its revenues and associated claims for the three months ended...

  • Page 48
    ... home delivery claims multiplied by 3, as home delivery claims typically cover a time period 3 times longer than network claims. OTHER BUSINESS OPERATIONS RESULTS OF OPERATIONS Other Business Operations operating income increased $70.9 million in 2013 over 2012. Due to the timing of the Merger, 2012...

  • Page 49
    ... Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." PROVISION FOR INCOME TAXES Our effective tax rate from continuing operations attributable to Express Scripts was 36.4% for the year ended December 31, 2013, compared to...

  • Page 50
    ... expense, which is non-cash and therefore added back to cash flows from operating activities to reconcile net income to net cash provided. Total employee stock-based compensation expense was $164.7 million in 2013, a decrease of $245.3 million over • • Express Scripts 2013 Annual Report 50

  • Page 51
    • 2012 due to acceleration of stock-based compensation expense and award vesting associated with the termination of certain Medco employees following the Merger during the year ended 2012. Changes in working capital resulted in cash inflows of $775.4 million in 2013 compared to cash inflows of ...

  • Page 52
    ... year ended December 31, 2013. Repurchases during the second quarter included 1.2 million shares of common stock for an aggregate purchase price of $68.4 million that were held on behalf of participants who acquired such shares upon the consummation of the Merger as a result of conversion of Medco...

  • Page 53
    ... on the forward price beginning after the effective date of the 2013 ASR Agreement and ending on or about May 5, 2014, subject to the right of the investment bank to accelerate settlement of the 2013 ASR Agreement. Under the terms of the contract, the maximum number of shares that could be delivered...

  • Page 54
    ... interest coverage ratio and a maximum leverage ratio. At December 31, 2013, we believe we were in compliance in all material respects with all covenants associated with our credit agreements. See Note 7 - Financing for more information on our credit facilities. Express Scripts 2013 Annual Report...

  • Page 55
    ..., 2012, Express Scripts terminated the facility and repaid all amounts drawn down. See Note 7 - Financing for more information on the accounts receivable financing facility. INTEREST RATE SWAP Medco entered into five interest rate swap agreements in 2004. These swap agreements, in effect, converted...

  • Page 56
    ... under our credit agreement. A hypothetical increase in interest rates of 1% would result in an increase in annual interest expense of approximately $20.0 million (pre-tax), assuming that obligations subject to variable interest rates remained constant. Express Scripts 2013 Annual Report 56

  • Page 57
    ... all material respects, the financial position of Express Scripts Holding Company and its subsidiaries at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting...

  • Page 58
    ... Retained earnings Common stock in treasury at cost, 60.4 and zero shares, respectively Total Express Scripts stockholders' equity Non-controlling interest Total stockholders' equity Total liabilities and stockholders' equity See accompanying Notes to Consolidated Financial Statements $ - 8.3 21,809...

  • Page 59
    ...500.9 505.0 2.55 - 2.55 2.53 - 2.53 1,275.8 - 1,275.8 (1) Includes retail pharmacy co-payments of $12,620.3, $11,668.6 and $5,786.6 for the years ended December 31, 2013, 2012 and 2011, respectively. See accompanying Notes to Consolidated Financial Statements 59 Express Scripts 2013 Annual Report

  • Page 60
    EXPRESS SCRIPTS HOLDING COMPANY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year Ended December 31, (in millions) 2013 2012 2011 Net income Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment Comprehensive income Less: Comprehensive income attributable to non-...

  • Page 61
    ...of unearned compensation under employee plans Exercise of stock options Tax benefit relating to employee stock compensation Distributions to non-controlling interest Balance at December 31, 2012 Net income Other comprehensive loss Treasury stock acquired Common stock issued under employee plans, net...

  • Page 62
    ...-discontinued operations Net cash used in investing activities Cash flows from financing activities: Treasury stock acquired Repayment of long-term debt Net proceeds from employee stock plans Excess tax benefit relating to employee stock-based compensation Distributions paid to non-controlling...

  • Page 63
    EXPRESS SCRIPTS HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of significant accounting policies Organization and operations. On April 2, 2012, Express Scripts, Inc. ("ESI") consummated a merger (the "Merger") with Medco Health Solutions, Inc. ("Medco") and both ESI and Medco...

  • Page 64
    ... at the time of purchase and re-evaluates such determination at each balance sheet date. All marketable securities at December 31, 2013 and 2012 were recorded in other noncurrent assets on our consolidated balance sheet (see Note 2 - Fair value measurements). Express Scripts 2013 Annual Report 64

  • Page 65
    ... 2 to 16 years, respectively. The customer contract related to our asset acquisition of the SmartD Medicare Prescription Drug Plan is being amortized over an estimated useful life of 10 years. All other intangible assets, excluding legacy ESI trade names which 65 Express Scripts 2013 Annual Report

  • Page 66
    ... from our PBM segment are earned by dispensing prescriptions from our home delivery and specialty pharmacies, processing claims for prescriptions filled by retail pharmacies in our networks, and providing services to drug manufacturers, including administration of discount programs (see also "Rebate...

  • Page 67
    ... pharmacy co-payments increased in the years ended December 31, 2013 and 2012 as compared to 2011 due to the Merger. Many of our contracts contain terms whereby we make certain financial and performance guarantees, including the minimum level of discounts or rebates a client may receive, generic...

  • Page 68
    ... other co-payments derived from providing 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 product offerings. These...

  • Page 69
    ... for the years ended December 31, 2013, 2012 and 2011, 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 70
    ... at fair value based on quoted market prices in active markets for identical securities (Level 1 inputs). Cash equivalents include investments in AAA-rated money market mutual funds with maturities of less than 90 days. FASB guidance allows a company to elect to measure eligible financial assets and...

  • Page 71
    ... in business Acquisitions. 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 Express Scripts stock, which is listed on the Nasdaq. Upon closing of the Merger, former ESI stockholders...

  • Page 72
    ... daily closing stock prices of ESI and Medco common stock. The expected term of the option is based on Medco historical employee stock option exercise behavior as well as the remaining contractual exercise term. The consolidated statement of operations for Express Scripts for the year ended December...

  • Page 73
    ... million for the years ended December 31, 2013 and 2012, respectively. Our investment in Surescripts (approximately $30.2 million and $11.9 million as of December 31, 2013 and 2012, respectively) is recorded in "Other assets" in our consolidated balance sheet. 73 Express Scripts 2013 Annual Report

  • Page 74
    ...(in millions) EAV Disposed UBC operations Technology solutions and publications for biopharmaceutical companies Health economics, outcomes research, data analytics and market access services Specialty services for pre-market trials Acute infusion therapies line of business Recorded in net loss from...

  • Page 75
    ...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. Following the sale, Express Scripts will work as a back-end pharmacy supplier...

  • Page 76
    Select financial information. The results of operations for our acute infusion therapies line of business, portions of UBC, as defined above, EAV and our European operations are reported as discontinued operations for all periods presented in the accompanying consolidated statement of operations in ...

  • Page 77
    ... home delivery dispensing pharmacy in Bensalem, Pennsylvania. We are currently in the process of closing this facility, which is scheduled to be completed in 2014. 6. Goodwill and other intangibles The following is a summary of our goodwill and other intangible assets for our two reportable segments...

  • Page 78
    ...This new intangible asset has a useful life of 10 years and is the result of our asset acquisition of the SmartD Medicare Prescription Drug Plan ("PDP") on September 1, 2013. The asset acquisition added 87,000 covered Medicare lives to our existing PDP offering. Sale of acute infusion therapies line...

  • Page 79
    ... connection with the sale of this line of business, goodwill of $12.0 million and trade names of $0.7 million were eliminated upon the sale of the business. As a gain was recorded on the sale, the elimination of these amounts was not recorded as an impairment. 79 Express Scripts 2013 Annual Report

  • Page 80
    ..., during the fourth quarter of 2012, the Company paid down $1,000.0 million of the term facility. As of December 31, 2013, $2,000.0 million was outstanding under the term facility with an average interest rate of 1.92%, of which $684.2 million is considered Express Scripts 2013 Annual Report 80

  • Page 81
    ... 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 $200.0 million of Medco's $500.0 million of 7.250...

  • Page 82
    ... sale, exchange, transfer or liquidation of the guarantor subsidiary) guaranteed on a senior unsecured basis by us and most of our current and future 100% owned domestic subsidiaries. ESI used the net proceeds for the acquisition of WellPoint's NextRx PBM Business. On September 10, 2010, Medco...

  • Page 83
    ... issuance of the November 2011 Senior Notes are being amortized over a weighted-average period of 12.1 years. Financing costs of $22.5 million for the issuance of the February 2012 Senior Notes are being amortized over a weighted-average period of 6.2 years. 83 Express Scripts 2013 Annual Report

  • Page 84
    ... with all covenants associated with our credit agreements. The following represents the schedule of current maturities, excluding unamortized discounts and premiums, for our long-term debt as of December 31, 2013 (amounts in millions): Year Ended December 31, 2014 2015 2016 2017 2018 Thereafter...

  • Page 85
    ... (the effect of foreign taxes on the effective tax rate for 2013, 2012, and 2011 is immaterial): Year Ended December 31, 2013 2012 2011 Statutory federal income tax rate State taxes, net of federal benefit Non-controlling interest Investment in foreign subsidiaries Other, net Effective tax rate 35...

  • Page 86
    ... of Medco's purchase price for the quarter ended March 31, 2013. (2) Includes $544.9 million in additions related to a claimed loss in 2012 on the disposition of Liberty. Included in our unrecognized tax benefits are $451.4 million of uncertain tax positions that would impact our effective tax rate...

  • Page 87
    ...an Accelerated Share Repurchase agreement (the "2013 ASR Agreement"). Under the terms of the 2013 ASR Agreement, upon payment of the purchase price, we received an initial delivery of 20.1 million shares of our common stock at a price of $67.16 per share, which represents, based on the closing share...

  • Page 88
    ... year ended December 31, 2013. Repurchases during the second quarter included 1.2 million shares of common stock for an aggregate purchase price of $68.4 million that were held on behalf of participants who acquired such shares upon the consummation of the Merger as a result of conversion of Medco...

  • Page 89
    ... tax benefit related to employee stock compensation recognized during the years ended December 31, 2013, 2012 and 2011 was $60.0 million, $153.9 million and $17.7 million, respectively. Effective upon the closing of the Merger, the Company assumed the sponsorship of the Medco Health Solutions, Inc...

  • Page 90
    ...certain officers and employees. Express Scripts' and ESI's restricted stock units have three-year graded vesting and performance shares cliff vest at the end of three years. In 2011, 0.5 million restricted units were awarded which cliff vest two years from the closing date of the Merger (the "merger...

  • Page 91
    ... upon the Merger consummation, the fair value of the projected benefit obligation was $291.3 million and the plan assets at fair value totaled $217.0 million, representing an underfunded status and resulting in a balance sheet liability of $74.3 million. 91 Express Scripts 2013 Annual Report

  • Page 92
    ...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. For the years ended December 31, 2013 and 2012, the net benefit for the Company's pension plan consisted of the...

  • Page 93
    ... amount for which the benefit obligations will be settled depends on future events, including interest rates and the life expectancy of the plan's members. The obligations are estimated using actuarial assumptions based on the current economic environment. 93 Express Scripts 2013 Annual Report

  • Page 94
    ... in passive bond market index lending funds and a shortterm investment fund. (9) The inclusion of hedge funds serves to further diversify the fund and the volatility of the hedge fund portfolio returns are expected to be less than that of global equities. Express Scripts 2013 Annual Report 94

  • Page 95
    ... Benefits Year Ended December 31, 2014 2015 2016 2017 2018 2019-2023 12. Commitments and contingencies $ 15.5 14.1 13.7 13.3 13.1 63.8 $ 0.3 0.3 0.3 0.2 0.2 0.7 Lease agreements. We have entered into noncancellable agreements to lease certain offices, distribution facilities and operating...

  • Page 96
    ... in all material respects, we cannot predict the outcome of these claims at this time. An unfavorable outcome in one or more of these matters could result in the imposition of judgments, monetary fines or penalties, or injunctive or administrative remedies. Express Scripts 2013 Annual Report 96

  • Page 97
    .... 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 2013, we determined our acute infusion therapies line of business which was acquired in the Merger and previously included...

  • Page 98
    ...retail pharmacy co-payments of $12,620.3, $11,668.6 and $5,786.6 for the years ended December 31, 2013, 2012 and 2011, respectively. (2) Includes home delivery, specialty and other including: (a) drugs distributed through patient assistance programs and (b) drugs we distribute to other PBMs' clients...

  • Page 99
    ... drugs by retail pharmacies in our retail pharmacy networks, revenues from the dispensing of prescription drugs from our home delivery pharmacies and revenues from the sale of certain fertility and specialty drugs. Other Business Operations product revenues consist of specialty distribution...

  • Page 100
    ... of our unaudited quarterly financial data: Quarters (in millions, except per share data) First Second Third Fourth (1) Fiscal 2013 Total revenues(2) Cost of revenues(2) Gross profit Selling, general and administrative Operating income Net income from continuing operations Net loss from...

  • Page 101
    ... 31, 2013 (through their respective dates of sale, as applicable), and as of December 31, 2012. Results for the year ended December 31, 2012 include the operations of Liberty, EAV, our European operations, UBC and our acute infusion therapies line of business 101 Express Scripts 2013 Annual Report

  • Page 102
    ...the condensed consolidating balance sheet as of December 31, 2012, amounts related to the goodwill allocated to Medco Health Solutions, Inc. and certain of its guarantor and non-guarantor subsidiaries have changed as we finalized the purchase price allocation in the first quarter of 2013. The impact...

  • Page 103
    ... Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated As of December 31, 2013 Cash and cash equivalents Restricted cash and investments Receivables, net Other current assets Current assets of discontinued operations...

  • Page 104
    ... Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated As of December 31, 2012 Cash and cash equivalents Restricted cash and investments Receivables, net Other current assets Current assets of discontinued operations...

  • Page 105
    ... Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated For the year ended December 31, 2013 Revenues Operating expenses Operating income Other (expense) income, net Income (loss) before income taxes Provision (benefit...

  • Page 106
    ... Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated For the year ended December 31, 2011 Revenues Operating expenses Operating income Other (expense) income, net Income (loss) before income taxes Provision (benefit...

  • Page 107
    ... Statement of Cash Flows Express Scripts Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated For the year ended December 31, 2013 Net cash flows provided by (used in) operating activities Cash flows from...

  • Page 108
    ... Statement of Cash Flows Express Scripts Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated For the year ended December 31, 2012 Net cash flows provided by (used in) operating activities Cash flows from...

  • Page 109
    ... Statement of Cash Flows Express Scripts Holding Company Express Scripts, Inc. Medco Health Solutions, Inc. NonGuarantors (in millions) Guarantors Eliminations Consolidated For the year ended December 31, 2011 Net cash flows provided by (used in) operating activities Cash flows from...

  • Page 110
    ...that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to the appropriate members of our management team, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions...

  • Page 111
    ... executive officer, principal financial 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...

  • Page 112
    ... Item 8 - Consolidated Financial Statements and Supplementary Data of this Report Report of Independent Registered Public Accounting Firm Consolidated Balance Sheet as of December 31, 2013 and 2012 Consolidated Statement of Operations for the years ended December 31, 2013, 2012 and 2011 Consolidated...

  • Page 113
    ... by the undersigned, thereunto duly authorized. EXPRESS SCRIPTS HOLDING COMPANY February 20, 2014 By: /s/ George Paz George Paz Chairman 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...

  • Page 114
    EXPRESS SCRIPTS HOLDING COMPANY Schedule II - Valuation and Qualifying Accounts and Reserves of Continuing Operations Years Ended December 31, 2013, 2012 and 2011 Col. A (in millions) Balance at Beginning of Period Col. B Charges to Costs and Expenses Col. C Additions Charges to Other Accounts ...

  • Page 115
    ... Exhibit No. 2.1 to Express Scripts, Inc.'s Current Report on Form 8-K filed April 14, 2009, File No. 000-20199. Agreement and Plan of Merger, dated as of July 20, 2011, by and among Express Scripts, Inc., Medco Health Solutions, Inc., Express Scripts Holding Company (formerly Aristotle Holding, Inc...

  • Page 116
    ...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 thereto and Union Bank...

  • Page 117
    ... 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 thereto and Wells Fargo Bank, National...

  • Page 118
    ... Medco Health Solutions, Inc., incorporated by reference to Exhibit 10.4 to Medco Health Solutions, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 27, 2003, File No. 001-31312. Executive Employment Agreement dated as of January 13, 2014, between Express Scripts Holding Company...

  • Page 119
    ...applicable to investors. The schedules to the Agreements have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be furnished supplementally to the SEC upon request. Filed herewith. Management contract or compensatory plan or arrangement. 2 3 119 Express Scripts 2013 Annual Report

  • Page 120
    Intentionally left blank Express Scripts 2013 Annual Report 120

  • Page 121
    Intentionally left blank 121 Express Scripts 2013 Annual Report

  • Page 122
    ...cer Glen Stettin, MD Senior Vice President Clinical Research & New Solutions Sara Wade Senior Vice President & Chief Human Resources Officer Tim Wentworth President & Chief Operating Officer Gary Wimberly Senior Vice President & Chief Information Officer Express Scripts 2013 Annual Report 122

  • Page 123
    ... Form 10-K for the fiscal year ended Dec. 31, 2013. These and other exhibits will be furnished by the Investor Relations department upon request. Investor Relations Contact 314.810.3115 [email protected] BOARD OF DIRECTORS Gary G. Benanav1,4 Director Retired Vice Chairman, New...

  • Page 124
    ... our Annual Report on recycled stocks that are certified by the Forest Stewardship Council (FSC). The cover and financial pages are printed on paper stock that has 10% post-consumer waste content. Express Scripts One Express Way St. Louis, MO 63121 Express-Scripts.com/Corporate © 2014 Express...