Medco 2012 Annual Report Download

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AR12
2012 Annual Report

Table of contents

  • Page 1
    AR12 2012 Annual Report

  • Page 2
    ...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 analysis services. The company...

  • Page 3
    ... is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes The aggregate market value of Registrant's voting stock held by non-affiliates as of June 29, 2012, was $45,119,423,896 based on 808,157,333 such shares held on such date by non-affiliates and the last sale price for the Common...

  • Page 4
    ...drugs for price, value and efficacy in order to assist clients in selecting a cost-effective formulary leveraging purchasing volume to deliver discounts to health benefit providers promoting the use of generics and low-cost brands offering cost-effective home delivery pharmacy and specialty services...

  • Page 5
    ... of prescription drugs through our contracted network of retail pharmacies, home delivery and specialty pharmacy services and Other Business Operations services. Revenues from the delivery of prescription drugs to our members represented 99.0% of revenues in 2012, 99.4% in 2011, and 99.4% in 2010...

  • Page 6
    ... 2012, 97.6% of our revenue was derived by our PBM operations, compared to 97.2% and 97.4% during 2011 and 2010, respectively. Retail Network Pharmacy Administration. We contract with retail pharmacies to provide prescription drugs to members of the pharmacy benefit plans we manage. In the United...

  • 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...

  • Page 8
    ... 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 Report

  • 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
    .... Our integrated PBM services include domestic and Canadian 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...

  • Page 11
    ... and financial position of ESI for the years ended December 31, 2011 and 2010 and for the period beginning January 1, 2012 through April 1, 2012. References to amounts for periods after the closing of the Merger on April 2, 2012 relate to Express Scripts. See Note 3 - Changes in business for...

  • Page 12
    ... of pharmacy benefits. The release of our 2011 Annual Drug Trend Report in April 2012 marked our nineteenth consecutive year of tracking prescription drug trends. Based on a large sample of our membership, the annual Drug Trend Report examined trends in pharmaceutical utilization and cost as well as...

  • Page 13
    ...under certain circumstances. Prompt Pay Laws. Under Medicare Part D and certain state laws, PBMs or certain PBM clients are required to pay retail pharmacy providers within established time periods that may be shorter than existing contracted terms and/or via 10 Express Scripts 2012 Annual Report 11

  • Page 14
    ... Employee benefit plans subject to ERISA are subject to certain rules, published by the DOL, relating to annual Form 5500 reporting obligations. The rules include reporting requirements for direct and indirect compensation received by plan service providers such as PBMs. However, on February 4, 2010...

  • Page 15
    ...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 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
    ...pharmaceutical products by our home delivery pharmacies, our Other Business Operations, including the distribution of specialty drugs, and the services rendered in connection with our disease management operations, may subject us to litigation and liability for damages. Commercial insurance coverage...

  • Page 19
    ..., Mr. McNamee worked for Misys Healthcare Systems, a healthcare technology company, as President and General Manager, Physician Systems, from September 2003 to February 2005. Available Information We make available through our website (www.express-scripts.com) access to our annual report on Form 10...

  • Page 20
    ... 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 usage, drug price inflation and increased rebates...

  • 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
    ... to manage the cost of healthcare, including prescription drug cost. Such proposals include "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...

  • Page 23
    ... revenues on incurred claims or healthcare quality improvements, and require some of our 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...

  • Page 24
    ... the passage of the Health Reform Laws. Additionally, as described above, the Health Reform Laws contain various changes to the Part D program and could have a financial impact on our PDP and our clients' demand for our other Part D products and services. 22 Express Scripts 2012 Annual Report

  • Page 25
    ... business to offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all. Difficulty in integrating the business of Express Scripts, Inc. and Medco or uncertainty around realization of the anticipated benefits of the Merger...

  • 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
    ... our business and results of operations. Changes in industry pricing benchmarks could materially impact our financial performance. Contracts in the prescription drug industry, including our contracts with retail pharmacy networks and with PBM and specialty pharmacy clients, generally use "average...

  • Page 28
    ... in connection with our business operations, including without limitation the dispensing of pharmaceutical products by our home delivery pharmacies, services rendered in connection with our disease management offering and our pharmaceutical services operations. A list of the significant proceedings...

  • 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
    ... necessary permits and licenses to be able to utilize the facility for business continuity purposes. We believe our facilities generally have been well maintained, are in good operating condition and have adequate capacity to meet our current business needs. 28 Express Scripts 2012 Annual Report

  • Page 31
    ... ESI and NextRX LLC f/k/a Anthem Prescription Management LLC and several other pharmacy benefit management companies. The complaint, filed by several California pharmacies as a putative class action, alleges rights to sue as a private attorney general under Express Scripts 2012 Annual Report 29 Q

  • Page 32
    ... of these alleged practices, Medco increased 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...

  • Page 33
    ... 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 seeking a preliminary injunction to prohibit the merger...

  • Page 34
    ... 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
    ...2, 2012, all ESI shares held in treasury were no longer outstanding and were cancelled and retired and ceased to exist. The Board of Directors of the Company has not adopted a stock repurchase program to allow for the repurchase of shares of Express Scripts. 32 Express Scripts 2012 Annual Report 33

  • Page 36
    ... of tax Net income attributable 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...

  • Page 37
    ... from continuing operations per adjusted claim, are affected by the changes in claim volumes between retail and mail-order, the relative representation of brand-name, generic and specialty pharmacy drugs, as well as the level of efficiency in the business. Express Scripts 2012 Annual Report 35

  • Page 38
    ...after the closing of the Merger on April 2, 2012 relate to Express Scripts. As the largest full-service pharmacy benefit management ("PBM") company, we provide healthcare management and administration services on behalf of our clients, which include managed care organizations, health insurers, third...

  • Page 39
    ... 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 through greater use of generics and low-cost brands, home delivery and specialty pharmacies. We also benefited from better management...

  • Page 40
    ... at cost. Customer contracts and relationships are valued 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...

  • Page 41
    ... 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 ALLOWANCE...

  • Page 42
    ...for the administration of our rebate programs, performed in conjunction with claims processing services provided to clients, are recorded as a reduction of cost of revenue and the portion of the rebate payable to customers is treated as a reduction of revenue. 40 Express Scripts 2012 Annual Report

  • Page 43
    ... "cost share") due from members based on prescription orders by those members, some of which are subsidized by CMS in cases of low-income membership. 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 44
    ... 753.9 Includes the 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...

  • Page 45
    ...in 2010. The increase during the period is due primarily to ingredient cost inflation as well as accelerated spending on certain projects in 2011 in order to create additional capacity to successfully complete integration activities for the Merger in 2012. These Express Scripts 2012 Annual Report 43

  • Page 46
    ... in management compensation and integration costs of $28.1 million during 2010 related to the acquisition of NextRx. PBM operating income increased $230.1 million, or 11.1%, in 2011 over 2010, based on the various factors described above. OTHER BUSINESS OPERATIONS OPERATING INCOME Year Ended...

  • 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
    ... 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 Annual Report

  • Page 49
    ... is listed on the Nasdaq stock exchange. Upon closing of the Merger, former ESI stockholders owned approximately 59% of Express Scripts and former Medco stockholders owned approximately 41%. Per the terms of the Merger Agreement, upon consummation of the Merger on April 2, 2012, each share of Medco...

  • Page 50
    ... 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 a consolidated basis. On February 6, 2012, we issued...

  • 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
    ...of operations or financial condition. This conclusion is based upon reasonably likely outcomes derived by reference to historical experience and current business plans. The gross liability for uncertain tax positions is $500.8 million and $32.4 million as of December 31, 2012 and 2011, respectively...

  • Page 53
    ... our revenues and cost of revenues. Most 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...

  • Page 54
    ... listed in the index appearing under Item 15(1) present fairly, in all material respects, 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...

  • Page 55
    ....7 18.9 2,068.2 23,385.0 23,385.0 10.7 23,395.7 $ 58,111.2 6.9 2,438.2 17.0 6,645.6 9,107.7 (6,634.0) 2,473.7 1.6 2,475.3 $ 15,607.0 See accompanying Notes to Consolidated Financial Statements Express Scripts 2012 Annual Report 53

  • 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
    EXPRESS SCRIPTS HOLDING COMPANY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) Year Ended December 31, 2012 2011 2010 $ 1,330.1 1.9 1,332.0 17.2 $ 1,314.8 $ 1,278.5 (2.8) 1,275.7 2.7 $ 1,273.0 $ 1,181.2 5.7 1,186.9 $ 1,186.9 Net income Other comprehensive (loss) income, net of tax: ...

  • Page 58
    EXPRESS SCRIPTS HOLDING COMPANY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Number of Shares Accumulated Other Comprehensive Income $ 14.1 5.7 19.8 (2.8) 17.0 1.9 18.9 Amount (in millions) Balance at December 31, 2009 Net income Other comprehensive income Stock split in form of ...

  • Page 59
    ...cash flows provided by operating activities Cash flows from investing activities: Acquisitions, net of cash acquired Purchases of property and equipment Purchase of short-term investments Proceeds from sale of short-term investments Proceeds from the sale of business Other Net cash used in investing...

  • Page 60
    ... after the closing of the Merger on April 2, 2012 relate to Express Scripts. We are the largest full-service pharmacy benefit management ("PBM") company, providing healthcare management and administration services on behalf of clients that include managed care organizations, health insurers, third...

  • Page 61
    ... within future filings. Prior quarters throughout 2012 and 2011 have also been revised to reflect these changes within Note 14 - Quarterly financial data. Dispositions. On December 3, 2012, we completed the sale of our PolyMedica Corporation ("Liberty") line of business. We will retain cash flows...

  • Page 62
    ... 1, the measurement of possible impairment would be based on a comparison of the fair value of each reporting unit to the carrying value of the reporting unit's net assets. We determine reporting units based on component parts of our business one level below 59 60 Express Scripts 2012 Annual Report

  • Page 63
    ... at cost. Customer contracts and relationships are valued 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...

  • Page 64
    ... related to the distribution of prescription drugs by retail pharmacies in our networks consist of the prescription price (ingredient cost plus dispensing fee) negotiated with our clients, including the portion to be settled directly by the member (co-payment), plus any associated administrative...

  • Page 65
    ... accounting guidance, amortization expense for 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...

  • Page 66
    ... 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 product offerings...

  • Page 67
    ... financial position, results of operations or cash flows. In June 2011, the FASB issued authoritative guidance eliminating the option to report other comprehensive income and its components in the statement of changes in equity. Under the new guidance, an entity can elect to 64 Express Scripts 2012...

  • Page 68
    ... receivable, equity method investments, accounts payable, guarantees, issued debt and firm commitments. Currently, we have not elected to account for any of our eligible items using the fair value option under this guidance. 66 Express Scripts 2012 Annual Report

  • Page 69
    .... 3. Changes 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 stock in Express Scripts, which is listed on the Nasdaq stock exchange. Upon closing of the...

  • Page 70
    ... on daily closing stock prices of ESI and Medco common stock. The expected term of the options is based on Medco's 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...

  • Page 71
    ... an estimated weighted-average amortization period of 5 years. The acquired intangible assets have been valued using an income approach and are being amortized on a basis that approximates the pattern of benefit. The excess of purchase price over tangible net assets and identified intangible assets...

  • Page 72
    ... from discontinued operations, net of tax Liberty CYC Recorded in selling, general and administrative Total disposition charges 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...

  • 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 71

  • Page 74
    ... 31, 2012 and 2011. In the first quarter of 2011, ESI ceased fulfilling prescriptions from our home delivery dispensing pharmacy in Bensalem, Pennsylvania. ESI currently maintains the location and all necessary permits and licenses to be able to utilize the facility for business continuity planning...

  • 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
    guidance, amortization of $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 ...

  • Page 77
    ...facility"). The term facility was used to pay a portion 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...

  • Page 78
    ... a loss of $1.5 million related to the carrying amount of the swaps and bank fees. 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 a consolidated basis. In August 2003...

  • 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
    ... months) at the treasury rate plus 30 basis points with respect to any February 2015 Senior Notes being redeemed, 35 basis points with respect to any February 2017 Senior Notes being redeemed, or 40 basis points with respect to any February 2022 Senior Notes 78 Express Scripts 2012 Annual Report

  • Page 81
    ... retained earnings in the amount of $65.6 million, $53.7 million and $43.7 million as of December 31, 2012, 2011, and 2010, respectively. Upon distribution of such earnings, we would be subject to United States income taxes of approximately $24.0 million. 78 Express Scripts 2012 Annual Report 79

  • 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
    ... shares of Express Scripts. As of December 31, 2012, approximately 47.5 million shares of our common stock have been reserved for employee benefit plans (see Note 10 - Employee benefit plans and stock-based compensation plans). Preferred Share Purchase Rights. In July 2001, ESI's Board of Directors...

  • Page 85
    ... term of stock options, SSRs, restricted stock units, restricted stock awards and performance shares granted under the 2011 LTIP is 10 years. As of December 31, 2012, approximately 24.7 million shares of our common stock are available for issuance under this plan. Express Scripts 2012 Annual Report...

  • Page 86
    .... The tax benefit 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...

  • Page 87
    ...and SSRs to certain officers, directors and employees to purchase shares of Express Scripts Holding Company common stock at fair market value on the date of grant. ESI's SSRs and stock options granted under both the 2000 LTIP and 2011 LTIP generally have three-year graded vesting, with the exception...

  • Page 88
    ... value per share of options granted during the year 11. Pension and other postretirement benefits 2012 $ 401.1 359.6 $ 15.13 2011 35.9 82.8 $ 14.74 $ 2010 38.2 123.7 $ 15.97 $ Net pension and postretirement benefit cost. In connection with the Merger, Express Scripts assumed sponsorship of Medco...

  • Page 89
    ... actuarial loss Net (benefit)/cost (1) Beginning April 2, 2012, the date of the Merger. Net actuarial gains and losses reflect experience differentials relating to differences between expected and actual demographic changes, differences between expected and actual healthcare cost increases and the...

  • Page 90
    ... 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. 88 Express Scripts 2012 Annual Report

  • Page 91
    ... by the pension plan at year-end. Assets classified as Level 2 include units held in common collective trust funds and mutual funds, which are valued based on the net asset values reported by the funds' investment managers, and a short-term fixed income investment fund which is valued using other...

  • Page 92
    ... 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. 90 Express Scripts 2012 Annual Report

  • Page 93
    .... 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 been...

  • Page 94
    ...2011 Product revenues: 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...

  • Page 95
    ...,607.0 - PBM product revenues consist of revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks, revenues from the dispensing of prescription drugs from our home delivery pharmacies and distribution of certain specialty and fertility drugs. Other Business...

  • 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
    ... 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 of $1,496.6 and $1,526.5 for the three months ended March 31, 2012 and 2011, respectively, $3,519.1 and $1,457...

  • Page 98
    ... 30, 2012, the Company identified certain immaterial errors in the presentation and allocation of certain line items in the previously reported condensed consolidating financial information between the Express Scripts column and the ESI column for the years ended December 31, 2011 and 2010. In...

  • 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
    ...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....8 692.9 36.3 10.7 23,385.0 $ 58,111.2 98 Express Scripts 2012 Annual Report

  • Page 101
    ... Intercompany Deferred 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...

  • Page 102
    Condensed Consolidating Statement of 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 $ - $ 29,763.1 $ 43,085.7 $ 22,151.6 $ 1,329.8 $ (2,472.1)...

  • Page 103
    ... 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) from...

  • Page 104
    ... 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 Other Net cash (used...

  • Page 105
    ...: Purchases of property and equipment Other Net cash (used in) provided by investing activities Cash flows from financing activities: Proceeds from long-term debt, net of discounts Treasury stock acquired Deferred financing fees Net proceeds from employee stock plans Excess tax benefit relating to...

  • Page 106
    ... financing activities: Repayment of long-term debt Treasury stock acquired Excess tax benefit relating to employee stock-based compensation Net proceeds from employee stock plans Deferred financing fees Other Net intercompany transactions Net cash (used in) provided by financing activities Effect of...

  • Page 107
    ... 8 of this annual report on Form 10-K. Changes in Internal Control Over Financial Reporting On April 2, 2012, the Merger was consummated between ESI and Medco. As a result of the Merger, the Company has incorporated internal controls over significant processes specific to the Merger that it believes...

  • Page 108
    ... and Related Party Transactions" and "Corporate Governance." Item 14 - Principal Accounting Fees and Services The information required by this item will be incorporated by reference from the Proxy Statement under the heading "Principal Accountant Fees." 106 Express Scripts 2012 Annual Report

  • 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
    ... /s/ Thomas P. Mac Mahon Director February 18, 2013 Thomas P. Mac Mahon /s/ Frank Mergenthaler Director February 18, 2013 Frank Mergenthaler /s/ Woodrow A. Myers, Jr. Director February 18, 2013 Woodrow A. Myers, Jr. Director February 18, 2013 108 Express Scripts 2012 Annual Report

  • Page 111
    ... 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 to Costs and...

  • Page 112
    ... 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 113
    ... to Express Scripts, Inc.'s Current Report on Form 8-K filed November 25, 2011, File No. 000-20199. Eighth Supplemental Indenture, dated as of April 2, 2012, among Express Scripts, Inc., Express Scripts Holding Company, Medco Health Solutions, Inc., the other subsidiaries of Express Scripts Holding...

  • Page 114
    ... 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 Wells...

  • Page 115
    ... Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. Form of Restricted Stock Unit Grant Notice for Non-Employee Directors used with respect to grants of restricted stock units by Express Scripts Holding Company under the Express Scripts, Inc. 2011 LongTerm Incentive Plan...

  • Page 116
    ... Express Scripts Holding Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. Form of terms and conditions for director stock option and restricted stock unit awards, incorporated by reference to Exhibit 10.2 to Medco Health Solutions, Inc.'s Current Report on Form 8-K filed...

  • Page 117
    ...Financial Officer of Express Scripts Holding Company, pursuant to 18 U.S.C.ss. 1350 and Exchange... The Stock and Interest Purchase Agreement listed in Exhibit 2.1 and the Merger Agreement listed in ...Management contract or compensatory plan or arrangement. 2 Express Scripts 2012 Annual Report 115

  • Page 118
    ... The following graph shows changes over the past five-year period in the value of $100 invested in: (1) 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...

  • Page 119
    ...| 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 Vice President and Chief Financial Officer, Interpublic Group...

  • Page 120
    ... our Annual Report on recycled stocks that are certified by the 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...