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Express Scripts 2014 Annual Report
NET INCOME AND EARNINGS PER SHARE ATTRIBUTABLE TO EXPRESS SCRIPTS
NetincomeattributabletoExpressScriptsincreased$163.0million,or8.8%,fortheyearendedDecember31,
2014from2013andincreased$531.7million,or40.5%,fortheyearendedDecember31,2013from2012.
BasicanddilutedearningspershareattributabletoExpressScriptsincreased17.5%and17.3%,respectively,for
theyearendedDecember31,2014from2013.Theseincreasesareprimarilyduetotreasurysharesrepurchasedthroughthe
ShareRepurchaseProgram,asdescribedinNote9-Commonstock,aswellasincreasedoperatingincomeduring2014.Basic
anddilutedearningspershareattributabletoExpressScriptsincreased26.7%and27.8%,respectively,fortheyearended
December31,2013from2012.Theseincreasesareprimarilyduetoincreasedoperatingincomeduring2013,aswellas
treasurysharerepurchases,partiallyoffsetbyincreasedamortizationofintangibleassetsandfinancingandcommitmentfees.
41
LIQUIDITY AND CAPITAL RESOURCES
OPERATING CASH FLOW AND CAPITAL EXPENDITURES
In2014,netcashprovidedbycontinuingoperationsdecreased$219.9millionto$4,549.0million.Changesin
operatingcashflowsfromcontinuingoperationsin2014wereimpactedbythefollowingfactors:
• Netincomefromcontinuingoperationsincreased$108.7millionin2014from2013.
• Depreciationandamortizationexpensedecreased$204.1millionin2014from2013.
• Deferredincomebenefitsdecreased$143.2millionin2014from2013duetotheoveralldecreaseinbook
amortizationaswellasdecreasesinaccruals.
• Employeestock-basedcompensationexpensedecreased$53.7millionin2014from2013duetoacceleration
ofstock-basedcompensationexpenseandawardvestingassociatedwiththeterminationofcertainMedco
employeesfollowingtheMerger.
• Changesinworkingcapitalresultedincashinflowsof$598.9millionin2014comparedtocashinflowsof
$775.4millionfromthesameperiodin2013,resultinginatotaldecreaseof$176.5million.
In2013,netcashprovidedbycontinuingoperationsincreased$17.8millionto$4,768.9million.Changesin
operatingcashflowsfromcontinuingoperationsin2013wereimpactedbythefollowingfactors:
• Netincomefromcontinuingoperationsincreased$563.9millionin2013from2012.
• Depreciationandamortizationexpenseincreased$575.6millionin2013from2012.
• Deferredincometaxesincreased$184.7millionin2013from2012reflectinganetchangeintemporary
differencesprimarilyattributabletobookamortizationoncustomercontractsacquiredintheMergerthatare
notdeductiblefortaxpurposes.
• Employeestock-basedcompensationexpensedecreased$245.3millionin2013from2012duetoacceleration
ofstock-basedcompensationexpenseandawardvestingassociatedwiththeterminationofcertainMedco
employeesfollowingtheMergerduringtheyearended2012.
• Changesinworkingcapitalresultedincashinflowsof$775.4millionin2013comparedtocashinflowsof
$1,425.8millionfromthesameperiodin2012,resultinginatotaldecreaseof$650.4million.Theworking
capitaldecreasewasprimarilyduetothetimingandreceiptandpaymentofclaimsandrebatespayable,
accountsreceivableandaccountpayable.
In2013,netcashusedindiscontinuedoperationswas$11.4million,comparedto$30.5millionprovidedby
discontinuedoperationsin2012,adecreaseof$41.9million.Thiswasduetochangesinworkingcapitalofouracuteinfusion
therapieslineofbusiness,portionsofUBCandourEuropeanoperationsin2013.
In2014,netcashusedininvestingactivitiesbycontinuingoperationsincreased$341.9millionto$411.9million.
Thischangeisprimarilydueto$356.9millionofcashinflowsrelatedtothesaleofdiscontinuedoperationsfortheyearended
December31,2013.Capitalexpendituresforpurchasesofpropertyandequipmentincreased$13.6millionin2014compared
to2013.CapitalexpendituresfortheyearendedDecember31,2014include$65.2millionrelatedtonewdatacenters,$68.2
millionrelatedtoanewhighvolumepharmacyfulfillmentfacilityand$15.0millionrelatedtoanewofficefacility.Weintend
tocontinuetoinvestininfrastructureandtechnology,whichwebelievewillprovideefficienciesinoperations,facilitategrowth
andenhancetheserviceweprovidetoourclients.Anticipatedcapitalexpenditureswillbefundedprimarilyfromoperating
cashflowor,totheextentnecessary,withborrowingsunderourrevolvingcreditfacility,describedbelow.