Quantcast
Last updated on April 17, 2014 at 8:41 EDT

Express Scripts Reports Fourth Quarter and Full Year Results

February 18, 2013

ST. LOUIS, Feb. 18, 2013 /PRNewswire/ — Express Scripts Holding Company (Nasdaq: ESRX) announced 2012 fourth quarter and full year net income attributable to Express Scripts shareholders from continuing operations of $515.9 million and $1,340.5 million, or $0.62 and $1.79 per diluted share, respectively. Adjusted earnings per share attributable to Express Scripts from continuing operations, as detailed in Table 4 were $1.05 and $3.74 per diluted share for the fourth quarter and full year, respectively.

“2012 was a monumental year for Express Scripts as we closed the acquisition of Medco and made significant progress integrating the two companies,” stated George Paz, chairman and chief executive officer. “Our financial performance in 2012 was strong, and as we look to the future, we are well positioned to capitalize on the complementary strengths of the combined organization, which enhance our ability to improve health outcomes, lower health care costs and continue to deliver long-term growth.”

Fourth Quarter 2012 Review (Results from continuing operations on an adjusted basis where indicated. See Tables 2 and 3)

All key metrics compared to 2011 were affected by the inclusion of Medco results beginning in the second quarter of 2012. Gross profit margin and EBITDA per adjusted claim increases over last year are mainly attributed to improved operating performance, increased generic utilization and realization of synergies.

  • Adjusted claims of 410.8 million, up 111%
  • Gross profit of $2.3 billion, up 160%
  • EBITDA of $1.6 billion, up 131%
  • EBITDA per adjusted claim of $4.01, up 10%
  • Cash flow from operations of $2.6 billion, compared to $0.5 billion in the fourth quarter of 2011

Full Year 2012 Review (Results from continuing operations on an adjusted basis where indicated. See Tables 2 and 3)

  • Adjusted claims of 1,395.7 million, up 86%
  • Gross profit of $7.5 billion, up 123%
  • EBITDA of $5.4 billion, up 103%
  • EBITDA per adjusted claim of $3.87, up 9%
  • Cash flow from operations of $4.8 billion, including merger-related costs, up from $2.2 billion in 2011

Due to the Federal Holiday on February 18, 2013, the Company expects to file its Annual Report on Form 10-K for the year ended December 31, 2012 with the Securities and Exchange Commission (“SEC”) on Tuesday, February 19, 2013. However, in connection with this earnings release, the contents of the Form 10-K substantially in the form expected to be filed on Tuesday, February 19, 2013, are expected to be made available to the public on the “Investor Information” section of the Company’s website at approximately 4:00 pm Eastern Time (3:00 p.m. Central Time) on Monday, February 18, 2013 at www.express-scripts.com/corporate. The Form 10-K, as filed with the SEC, will replace that document on the Company’s website as soon as practicable following its filing with the SEC.

2013 Guidance

The Company expects to achieve adjusted earnings per diluted share from continuing operations for 2013 in the range of $4.20 to $4.30, or 12% to 15% growth over 2012. Adjusted earnings per share for 2013 exclude items as detailed in Table 6.

  • Total adjusted claims are expected to grow 5% to 7% from 1,395.7 million adjusted claims reported in 2012
  • Selling, general and administrative expense is expected to decline 8% to 10% from $2,365.9 million reported on an adjusted basis in 2012
  • EBITDA per adjusted claim is expected to grow 15% to 18% from $3.87 reported on an adjusted basis in 2012
  • Effective tax rate is expected to be approximately 39%
  • Diluted shares outstanding is expected to be in a range of 825 million to 835 million

About Express Scripts

Express Scripts (NASDAQ: ESRX) manages more than a billion prescriptions each year for tens of millions of patients. On behalf of our clients – employers, health plans, unions and government health programs – we make the use of prescription drugs safer and more affordable. Express Scripts uniquely combines three capabilities – behavioral sciences, clinical specialization and actionable data – to create Health Decision Science(SM), our innovative approach to help individuals make the best drug choices, pharmacy choices and health choices. Better decisions mean healthier outcomes.

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 analysis services. The company also distributes a full range of biopharmaceutical products and provides extensive cost-management and patient-care services.

For more information, visit Lab.Express-Scripts.com or follow @ExpressScripts on Twitter.

SAFE HARBOR STATEMENT

This press release contains forward-looking statements, including, but not limited to, statements related to the Company’s plans, objectives, expectations (financial and otherwise) or intentions. Actual results may differ significantly from those projected or suggested in any forward-looking statements. Factors that may impact these forward-looking statements can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Form 10-K filed with the SEC on or about February 19, 2013. A copy of this form can be found at the Investor Relations section of Express Scripts’ web site at http://www.express-scripts.com/corporate.

We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

                                                                                   EXPRESS SCRIPTS HOLDING COMPANY
                                                                            Unaudited Consolidated Statement of Operations

                                                 Three Months Ended                          Year Ended
                                                    December 31,                            December 31,
                                                    ------------                            ------------
    (in millions, except per share
     data)                                                          2012                                    2011                                      2012                                    2011
                                                                    ----                                    ----                                      ----                                    ----

    Revenues(*)                                                $27,410.7                               $12,101.4                                 $93,858.1                               $46,128.3
    Cost of revenues(*)                                         25,107.8                                11,256.9                                  86,527.9                                42,918.4
                                                                --------                                --------                                  --------                                --------
       Gross profit                                              2,302.9                                   844.5                                   7,330.2                                 3,209.9
    Selling, general and
     administrative                                              1,398.4                                   268.0                                   4,545.7                                   895.5
                                                                 -------                                   -----                                   -------                                   -----
    Operating income                                               904.5                                   576.5                                   2,784.5                                 2,314.4
                                                                   -----                                   -----                                   -------                                 -------
    Other (expense) income:
       Equity income from joint venture                              5.5                                       -                                      14.9                                       -
       Interest income                                               4.6                                     4.6                                      10.6                                    12.4
       Interest expense and other                                 (157.4)                                 (115.4)                                   (619.0)                                 (299.7)
                                                                  ------                                  ------                                    ------                                  ------
                                                                  (147.3)                                 (110.8)                                   (593.5)                                 (287.3)
                                                                  ------                                  ------                                    ------                                  ------
    Income before income taxes                                     757.2                                   465.7                                   2,191.0                                 2,027.1
    Provision for income taxes                                     234.4                                   173.7                                     833.3                                   748.6
                                                                   -----                                   -----                                     -----                                   -----
    Net income from continuing
     operations                                                    522.8                                   292.0                                   1,357.7                                 1,278.5
    Net loss from discontinued
     operations, net of tax                                        (11.8)                                      -                                     (27.6)                                      -
                                                                   -----                                     ---                                     -----                                     ---
    Net income                                                     511.0                                   292.0                                   1,330.1                                 1,278.5
    Less: Net income attributable to
     non-controlling interest                                        6.9                                     1.6                                      17.2                                     2.7
                                                                     ---                                     ---                                      ----                                     ---
    Net income attributable to Express
     Scripts                                                      $504.1                                  $290.4                                  $1,312.9                                $1,275.8
                                                                  ======                                  ======                                  ========                                ========

    Weighted average number of common
     shares outstanding during the
     period:

       Basic                                                       817.3                                   485.3                                     731.3                                   500.9
       Diluted                                                     832.4                                   489.0                                     747.3                                   505.0

    Basic earnings (loss) per share
       Continuing operations attributable
        to Express Scripts                                         $0.63                                   $0.60                                     $1.83                                   $2.55
       Discontinued operations
        attributable to Express Scripts                            (0.01)                                      -                                     (0.04)                                      -
       Net earnings attributable to
        Express Scripts                                             0.62                                    0.60                                      1.80                                    2.55

    Diluted earnings (loss) per share
       Continuing operations attributable
        to Express Scripts                                         $0.62                                   $0.59                                     $1.79                                   $2.53
       Discontinued operations
        attributable to Express Scripts                            (0.01)                                      -                                     (0.04)                                      -
       Net earnings attributable to
        Express Scripts                                             0.61                                    0.59                                      1.76                                    2.53

    Amounts attributable to Express
     Scripts shareholders:
       Income from continuing operations,
        net of tax                                                $515.9                                  $290.4                                  $1,340.5                                $1,275.8
       Discontinued operations, net of
        tax                                                        (11.8)                                      -                                     (27.6)                                      -
                                                                   -----                                     ---                                     -----                                     ---
       Net income attributable to Express
        Scripts shareholders                                      $504.1                                  $290.4                                  $1,312.9                                $1,275.8
    (*) Includes retail pharmacy co-
     payments of $3,304.0 million
     and $1,412.6 million for the
     three months ended December 31,
     2012 and 2011, respectively and
     $11,668.6 million and $5,786.6
     million for the year ended
     December 31, 2012 and 2011,
     respectively.

                     EXPRESS SCRIPTS HOLDING COMPANY
                   Unaudited Consolidated Balance Sheet

                              December 31,              December 31,
    (in
     millions)                                 2012                      2011
                                               ----                      ----
    Assets
    Current
     assets:
    Cash and
     cash
     equivalents                           $2,793.9                  $5,620.1
    Restricted
     cash and
     investments                               19.6                      17.8
     Receivables,
     net                                    5,480.6                   1,915.7
    Inventories                             1,661.9                     374.4
    Deferred
     taxes                                    408.5                      45.8
    Prepaid
     expenses
     and other
     current
     assets                                   194.4                      84.2
    Current
     assets of
     discontinued
     operations                               198.0                         -
                                              -----                       ---
    Total
     current
     assets                                10,756.9                   8,058.0
    Property
     and
     equipment,
     net                                    1,634.3                     416.2
    Goodwill                               29,359.8                   5,485.7
    Other
     intangible
     assets,
     net                                   16,037.9                   1,620.9
    Other
     assets                                    56.6                      26.2
    Noncurrent
     assets of
     discontinued
     operations                               265.7                         -
                                              -----                       ---
    Total
     assets                               $58,111.2                 $15,607.0
                                          =========                 =========

     Liabilities
     and
     stockholders'
     equity
    Current
     liabilities:
    Claims and
     rebates
     payable                               $7,440.0                  $2,874.1
    Accounts
     payable                                2,909.1                     928.1
    Accrued
     expenses                               1,630.0                     656.0
    Current
     maturities
     of long-
     term debt                                934.9                     999.9
    Current
     liabilities
     of
     discontinued
     operations                               143.4                         -
                                              -----                       ---
    Total
     current
     liabilities                           13,057.4                   5,458.1
    Long-term
     debt                                  14,980.1                   7,076.4
    Deferred
     taxes                                  5,948.8                     546.5
    Other
     liabilities                              692.9                      50.7
    Noncurrent
     liabilities
     of
     discontinued
     operations                                36.3                         -
                                               ----                       ---
    Total
     liabilities                           34,715.5                  13,131.7
                                           --------                  --------

     Stockholders'
     equity:
    Preferred
     stock,
     15.0
     shares
     authorized,
     $0.01 par
     value per
     share;
    and no
     shares
     issued
     and
     outstanding                                  -                         -
    Common
     stock,
     2,985.0
     shares
     authorized,
     $0.01 par
     value per
     share;
    shares
     issued:
     818.1 and
     690.7,
     respectively;
    shares
     outstanding:
     818.1 and
     484.6,
     respectively                               8.2                       6.9
    Additional
     paid-in
     capital                               21,289.7                   2,438.2
     Accumulated
     other
     comprehensive
     income                                    18.9                      17.0
    Retained
     earnings                               2,068.2                   6,645.6
                                            -------                   -------
                                           23,385.0                   9,107.7

    Common
     stock in
     treasury
     at cost,
     zero and
     206.1
     shares,
     respectively                                 -                  (6,634.0)
                                                ---                  --------
    Total
     Express
     Scripts
     stockholders'
     equity                                23,385.0                   2,473.7
                                           --------                   -------
    Non-
     controlling
     interest                                  10.7                       1.6
                                               ----                       ---
    Total
     stockholders'
     equity                                23,395.7                   2,475.3
                                           --------                   -------
    Total
     liabilities
     and
     stockholders'
     equity                               $58,111.2                 $15,607.0
                                          =========                 =========

                     EXPRESS SCRIPTS HOLDING COMPANY
              Unaudited Consolidated Statement of Cash Flows
                                                     Year Ended
                                                    December 31,
                                                    ------------
    (in millions)                                     2012           2011
                                                      ----           ----

    Cash flows from operating activities:
    Net income                                    $1,330.1       $1,278.5
    Net loss from discontinued operations,
     net of tax                                       27.6              -
                                                      ----            ---
      Net income from continuing operations        1,357.7        1,278.5
    Adjustments to reconcile net income to
     net cash provided by operating
     activities:
    Depreciation and amortization                  1,872.6          253.4
    Deferred income taxes                           (390.4)         137.8
    Employee stock-based compensation expense        410.0           48.8
    Bad debt expense                                 158.8           11.6
    Deferred financing fees                           43.6           81.0
    Other, net                                      (118.5)           4.5
    Changes in operating assets and
     liabilities, net of effects of
     acquisition:
    Receivables                                      325.2         (206.1)
    Inventories                                     (515.8)           8.0
    Other current and noncurrent assets              303.2          119.2
    Claims and rebates payable                        82.8          207.5
    Accounts payable                                 982.2          271.4
    Other current and noncurrent liabilities         240.8          (22.5)
                                                     -----          -----
    Net cash provided by operating activities
     -continuing operations                        4,752.2        2,193.1
    Net cash provided by operating activities
     -discontinued operations                         29.4              -
                                                      ----            ---
    Net cash flows provided by operating
     activities                                    4,781.6        2,193.1
                                                   -------        -------

    Cash flows from investing activities:
    Acquisitions, net of cash acquired           (10,326.4)             -
    Purchases of property and equipment             (160.2)        (144.4)
    Purchase of short-term investments                (2.8)         (25.0)
    Proceeds from sale of short-term
     investments                                       4.6           45.0
    Proceeds from sale of business                    61.5              -
    Other                                             (5.8)           0.5
                                                      ----            ---
    Net cash used in investing activities -
     continuing operations                       (10,429.1)        (123.9)
                                                 ---------         ------
    Acquisitions, cash acquired -
     discontinued operations                          42.8              -
    Net cash used in investing activities -
     discontinued operations                          (5.4)             -
                                                      ----            ---
    Net cash used in investing activities        (10,391.7)        (123.9)
                                                 ---------         ------

    Cash flows from financing activities:
    Proceeds from long-term debt, net of
     discounts                                     7,458.9        5,580.3
    Repayment of long-term debt                   (3,868.5)          (0.1)
    Repayment of revolving credit line, net       (1,000.0)             -
    Proceeds from accounts receivable
     financing facility                              600.0              -
    Repayment of accounts receivable
     financing facility                             (600.0)             -
    Excess tax benefit relating to employee
     stock-based compensation                         45.3           28.3
    Net proceeds from employee stock plans           326.0           32.2
    Deferred financing fees                         (103.2)         (91.6)
    Treasury stock acquired                              -       (2,515.7)
    Distributions paid to non-controlling
     interest                                         (8.1)          (1.1)
    Other                                                -           (2.9)
                                                       ---           ----
    Net cash provided by financing activities
     -continuing operations                        2,850.4        3,029.4
    Net cash used in financing activities -
     discontinued operations                         (26.8)             -
                                                     -----            ---
    Net cash provided by financing activities      2,823.6        3,029.4
                                                   -------        -------

    Effect of foreign currency translation
     adjustment                                        2.0           (2.2)

    Less: cash attributable to discontinued
     operations                                      (41.7)             -

    Net (decrease) increase in cash and cash
     equivalents                                  (2,826.2)       5,096.4
    Cash and cash equivalents at beginning of
     year                                          5,620.1          523.7
                                                   -------          -----
    Cash and cash equivalents at end of year      $2,793.9       $5,620.1
                                                  ========       ========

                                                                                           Table 1
                                                         Express Scripts Holding Company Unaudited Consolidated Selected Information
                                                                                        (in millions)

                                                                                                                  Three Months Ended         Year Ended
                                                                                                                     December 31,           December 31,
                                                                                                                     ------------           ------------
                                                                                                                     2012             2011             2012    2011
                                                                                                                     ----             ----             ----    ----
    Claims Volume
    Continuing operations:
    Network                                                                                                         299.2            156.4          1,020.7   600.4
    Home delivery and specialty(1)                                                                                   38.3             13.6            129.1    53.4
                                                                                                                     ----             ----            -----    ----
       Total claims                                                                                                 337.5            170.0          1,149.8   653.8
                                                                                                                    -----            -----          -------   -----

    Total adjusted claims - continuing operations(2)                                                                410.8            194.9          1,395.7   751.5
                                                                                                                    =====            =====          =======   =====

    Discontinued operations:
    Home delivery and specialty(1)                                                                                    1.2                -              4.9       -
                                                                                                                      ---              ---              ---     ---

    Total adjusted claims - discontinued operations(2)                                                                3.6                -             14.7       -
                                                                                                                      ===              ===             ====     ===

    Depreciation and Amortization (D&A):
    Revenue amortization(3)                                                                                         $28.5            $28.5           $114.0  $114.0
    Cost of revenues depreciation                                                                                    32.0             12.3            105.3    43.5
    Selling, general and administrative depreciation                                                                 58.4             14.9            178.9    55.2
    Selling, general and administrative amortization                                                                483.1             10.2          1,474.4    40.7
                                                                                                                    -----             ----          -------    ----
       Total D&A - continuing operations                                                                           $602.0            $65.9         $1,872.6  $253.4
                                                                                                                   ======            =====         ========  ======

    Generic Fill Rate
    Network                                                                                                          80.6%            75.8%            79.4%   75.3%
    Home delivery                                                                                                    73.7%            64.7%            71.5%   63.0%
    Overall                                                                                                          79.8%            74.8%            78.5%   74.2%

    Note: See Appendix for Footnotes and Additional Notes.

                                                                                              Table 2
                                               Calculation of Express Scripts Holding Company Adjusted Gross Profit and SG&A - Continuing Operations
                                                                                           (in millions)

                                                                                                                                    Three Months Ended         Year Ended
                                                                                                                                       December 31,           December 31,
                                                                                                                                       ------------           ------------
                                                                                                                                         2012            2011         2012     2011
                                                                                                                                         ----            ----         ----     ----
    Gross profit, as reported                                                                                                        $2,302.9          $844.5     $7,330.2 $3,209.9
    Amortization of legacy Express Scripts intangible assets (3)                                                                         28.5            28.5        114.0    114.0
    Non-recurring transaction and integration costs (4)                                                                                  16.0               -         49.7        -
    Accrual related to client contractual dispute (5)                                                                                       -            30.0            -     30.0
                                                                                                                                          ---            ----          ---     ----
    Adjusted gross profit                                                                                                            $2,347.4          $903.0     $7,493.9 $3,353.9
                                                                                                                                     ========          ======     ======== ========

    Selling, general and administrative, as reported                                                                                 $1,398.4          $268.0     $4,545.7   $895.5
    Amortization of legacy Express Scripts intangible assets (3)                                                                         10.2            10.2         40.7     40.7
    Amortization of Medco-related intangible assets (6)                                                                                 472.9               -      1,433.7        -
    Non-recurring transaction and integration costs (4)                                                                                 130.8            42.2        705.4     62.5
                                                                                                                                        -----            ----        -----     ----
    Adjusted selling, general and administrative                                                                                       $784.5          $215.6     $2,365.9   $792.3
                                                                                                                                       ======          ======     ========   ======

    Note: See Appendix for Footnotes and Additional Notes.

    The Company is providing adjusted
     gross profit and adjusted
     selling, general and
     administrative expenses, in each
     case, excluding the impact of
     non-recurring charges and
     amortization of intangible assets
     (both of which are non-GAAP
     financial measures) in order to
     compare the underlying financial
     performance to prior periods.

                                                       Table 3
                                Express Scripts Holding Company EBITDA Reconciliation
                                         (in millions, except per claim data)
    The following is a reconciliation of net income from continuing operations attributable to Express Scripts to EBITDA from
     continuing operations attributable to Express Scripts. The Company believes net income is the most directly comparable measure
     calculated under U.S. GAAP.
                                                             Three Months Ended                  Year Ended
                                                                December 31,                    December 31,
                                                                ------------                    ------------
                                                                 2012              2011                  2012                2011
                                                                 ----              ----                  ----                ----
    Net income from
     continuing
     operations,
     attributable to
     Express
     Scripts, as
     reported                                                  $515.9            $290.4              $1,340.5            $1,275.8
      Provision for
       income taxes                                             234.4             173.7                 833.3               748.6
      Depreciation and
       amortization                                             602.0              65.9               1,872.6               253.4
      Interest
       expense, net                                             152.8             110.8                 608.4               287.3
      Equity income
       from joint
       venture                                                   (5.5)                -                 (14.9)                  -
                                                                 ----               ---                 -----                 ---
    EBITDA from
     continuing
     operations,
     attributable to
     Express
     Scripts, as
     reported                                                 1,499.6             640.8               4,639.9             2,565.1
    Non-recurring
     transaction and
     integration
     costs (4)                                                  146.8              42.2                 755.1                62.5
    Accrual related
     to client
     contractual
     dispute (5)                                                    -              30.0                     -                30.0
                                                                  ---              ----                   ---                ----
    Adjusted EBITDA
     from continuing
     operations,
     attributable to
     Express Scripts                                         $1,646.4            $713.0              $5,395.0            $2,657.6

    Total adjusted
     claims -
     continuing
     operations                                                 410.8             194.9               1,395.7               751.5

    Adjusted EBITDA
     per adjusted
     claim                                                      $4.01             $3.66                 $3.87               $3.54

    Note: See Appendix for Footnotes and Additional Notes.

    The Company is providing adjusted
     EBITDA excluding the impact of
     non-recurring charges in order to
     compare the underlying financial
     performance to prior periods.

    EBITDA is earnings before other
     income (expense), interest, taxes,
     depreciation and amortization, or
     alternatively calculated as
     operating income plus depreciation
     and amortization. EBITDA is
     presented because it is a widely
     accepted indicator of a company's
     ability to service indebtedness
     and is frequently used to evaluate
     a company's performance. EBITDA,
     however, should not be considered
     as an alternative to net income,
     as a measure of operating
     performance, as an alternative to
     cash flow, as a measure of
     liquidity or as a substitute for
     any other measure computed in
     accordance with accounting
     principles generally accepted in
     the United States. In addition,
     our definition and calculation of
     EBITDA may not be comparable to
     that used by other companies.

    Adjusted EBITDA per adjusted claim
     is a supplemental measurement used
     by analysts and investors to help
     evaluate overall operating
     performance. We have calculated
     adjusted EBITDA excluding certain
     charges recorded each year, as
     these charges are not considered
     an indicator of ongoing company
     performance. Adjusted EBITDA per
     adjusted claim is calculated by
     dividing adjusted EBITDA by the
     adjusted claim volume for the
     period. This measure is used as an
     indicator of EBITDA performance on
     a per-unit basis. Adjusted
     EBITDA, and as a result, adjusted
     EBITDA 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.

                                                                               Table 4
                                                     Calculation of Express Scripts Holding Company Adjusted EPS

                                                                  Three Months Ended                                               Year Ended
                                                                     December 31,                                                 December 31,
                                                                     ------------                                                 ------------
                                                                     2012                                    2011                                     2012                   2011
                                                                                                                               (per diluted share)
                                                                                                                               ------------------
    EPS from continuing operations
     attributable to Express Scripts, as
     reported                                                       $0.62                                   $0.59                                    $1.79                  $2.53

    Non-recurring/transaction-related items:
    Transaction and integration costs (4)                            0.11                                    0.06                                     0.61                   0.08
    Medco acquisition pre-close financing
     costs (7)                                                          -                                    0.08                                     0.07                   0.13
    Discrete tax items (8)                                          (0.06)                                      -                                    (0.01)                     -
    Accrual related to client contractual
     dispute (5)                                                        -                                    0.04                                        -                   0.04

    Amortization of:
    Legacy Express Scripts intangible
     assets(3)                                                       0.03                                    0.05                                     0.12                   0.19
    Medco-related intangible assets(6)                               0.35                                       -                                     1.16                      -

    EPS from continuing operations, adjusted                        $1.05                                   $0.82                                    $3.74                  $2.97
                                                                    -----                                   -----                                    -----                  -----

    EPS from discontinued operations
     attributable to Express Scripts, as
     reported                                                      $(0.01)                                    $ -                                   $(0.04)                   $ -

    Non-recurring/transaction-related items:
    Transaction and integration costs (9)                               -                                       -                                     0.01                      -

    Amortization of:
    Medco-related intangible assets(9)                                  -                                       -                                     0.02                      -

    EPS from discontinued operations, adjusted                     $(0.01)                                    $ -                                   $(0.01)                   $ -
                                                                   ------                                     ---                                   ------                    ---

    Total EPS attributable to Express Scripts,
     adjusted                                                       $1.04                                   $0.82                                    $3.73                  $2.97
                                                                    =====                                   =====                                    =====                  =====

    Note: See Appendix for Footnotes and Additional Notes.

    The Company is providing EPS and EPS excluding the impact of non-recurring /transaction-related items and amortization of intangible assets (which is a non-GAAP financial
     measure) in order to compare the underlying financial performance to prior periods.

                                                                               Table 5
                                          Calculation of Express Scripts Holding Company Adjusted Effective Income Tax Rate
                                                                            (in millions)
                                                                                   Year Ended
                                                                               December 31, 2012
                                                                               -----------------
                                                                 Pre-Tax               Provision for Income Taxes                Adjusted Effective Income
                                                                                                                                          Tax Rate
    Income from continuing operations, as
     reported                                                     2,191.0                                   833.3
    Income from discontinued operations, as
     reported                                                       (15.4)                                   12.2
                                                                    -----                                    ----
                                                                  2,175.6                                   845.5
    Non-controlling interest                                        (17.2)                                      -
                                                                    -----                                     ---
    Total operations attributable to Express
     Scripts                                                      2,158.4                                   845.5
    Discrete tax items(8)                                               -                                     8.2
                                                                      ---                                     ---
    Total operations attributable to Express
     Scripts                                                      2,158.4                                   853.7                                     39.6%
                                                                  =======                                   =====

    Note: See Appendix for Footnotes and Additional Notes.

    The Company is providing adjusted effective income tax rate excluding the impact of discrete tax items (which is a non-GAAP financial measure) in order to compare the
     underlying financial performance to prior periods.

                                  Table 6
                         2013 Guidance Information
                                               Estimated
                                              Year Ended
                                              December 31,
                                                  2013
                                             -------------
                                              (per diluted
                                                 share)

    Adjusted EPS from continuing
     operations guidance                              $4.20 to $4.30

    GAAP items not included in guidance:

    Amortization of legacy Express
     Scripts intangible assets                        $0.11

    Amortization of Medco-related
     intangible assets (10)                           $1.38

    Transaction, integration and other
     non-recurring costs(11)               To be determined

    Note: See Appendix for Footnotes and Additional Notes.
    The full-year impact of Medco-
     related transaction and
     integration costs have yet to be
     determined. Accordingly, the
     Company is unable to include these
     charges in the list of GAAP items
     not included in guidance for 2013
     revised adjusted EPS from
     continuing operations or to
     provide a reconciliation to the
     corresponding GAAP measure.

                   Appendix
                   Footnotes

    (1) Includes home delivery, specialty
     and other including: (a) drugs
     distributed through patient
     assistance programs (b) drugs we
     distribute to other PBMs' clients
     under limited distribution contracts
     with pharmaceutical manufacturers and
     (c) FreedomFP claims.

    (2) Total adjusted claims reflect home
     delivery claims multiplied by 3, as
     home delivery claims typically cover
     a time period 3 times longer than
     retail claims.

    (3) Amortization of legacy Express
     Scripts intangible assets include
     amounts in both revenues and selling,
     general and administrative expense.
     Revenue amortization is related to
     the customer contract with WellPoint
     which consummated upon closing of the
     NextRx acquisition in 2009. Under
     U.S. GAAP standards, amortization of
     intangibles that arise in connection
     with consideration given to a
     customer by a vendor is characterized
     as a reduction of revenues.
     Intangible amortization of $28.5
     million ($17.1 million and $17.9
     million net of tax in 2012 and 2011,
     respectively) is included as a
     reduction to revenue for the three
     months ended December 31, 2012 and
     2011. Intangible amortization of
     $114.0 million ($68.8 million and
     $71.9 million net of tax in 2012 and
     2011, respectively) is included as a
     reduction to revenue for the year
     ended December 31, 2012 and 2011.

    In addition, intangible amortization
     of $10.2 million ($6.1 million and
     $6.4 million net of tax in 2012 and
     2011, respectively) is included in
     selling, general and administrative
     expense in the three months ended
     December 31, 2012 and 2011.
     Intangible amortization of $40.7
     million ($24.5 million and $25.7
     million net of tax in 2012 and 2011,
     respectively) is included in selling,
     general and administrative expense in
     the year ended December 31, 2012 and
     2011.

    (4) Non-recurring transaction and
     integration costs include those
     directly related to the acquisition
     of Medco Health Solutions, Inc.
     ("Medco").

    Costs of $16.0 million ($10.4 million
     net of tax) and $49.7 million ($30.0
     million net of tax) for the three
     months and year ended December 31,
     2012, respectively, primarily
     composed of integration-related
     activities, are included in cost of
     revenues.

    Costs of $131.3 million ($85.0 million
     net of tax) and $42.2 million ($26.4
     million net of tax) primarily
     composed of severance costs,
     including stock compensation, are
     included in selling, general and
     administrative expense in the three
     months ended December 31, 2012 and
     2011, respectively. Costs of $697.2
     million ($420.7 million net of tax)
     and $62.5 million ($39.4 million net
     of tax) are included in selling,
     general and administrative expense in
     the years ended December 31, 2012 and
     2011, respectively.

    The Company recorded a net benefit of
     $0.5 million ($0.4 million net of
     tax) and net charges of $8.2 million
     ($4.9 million net of tax) within
     selling, general and administrative
     expenses for the three months and
     year ended December 31, 2012,
     respectively, in conjunction with the
     strategic decision to exit various
     businesses.

    (5) In December 2011, the Company
     recorded an accrual of $30 million
     ($18.9 million net of tax) as an
     offset to revenues for the year ended
     December 31, 2011 related to a client
     contractual dispute.

    (6) Amortization of intangible assets
     related to the acquisition of Medco
     of $472.9 million ($289.6 million net
     of tax) and $1,433.7 million ($865.2
     million net of tax) for the three
     months and year ended December 31,
     2012, respectively is included in
     selling, general and administrative
     expense.

    (7) Financing costs include fees
     related to the amortization of
     remaining bridge loan fees,
     commitment fees related to the new
     credit agreement and interest and
     fees on the senior notes secured in
     conjunction with the acquisition of
     Medco. Costs of $63.1 million ($39.5
     million net of tax) is included in
     interest expense in the three months
     ended December 31, 2011. Costs of
     $85.2 million ($52.3 million net of
     tax) and $105.0 million ($66.2
     million net of tax) is included in
     interest expense for the years ended
     December 31, 2012 and 2011,
     respectively.

    (8) Provision for income taxes
     includes discrete tax benefits of
     $51.7 million and $8.2 million for
     the quarter and year ended December
     31, 2012, respectively. These items
     primarily relate to adjustments to
     prior year income tax return filings
     partially offset by a reversal of the
     deferred tax asset previously
     established for transaction-related
     costs that became nondeductible upon
     the consummation of the Merger.

    (9) Net income from discontinued
     operations, net of tax includes $8.1
     million ($5.0 million net of tax) and
     $25.1 million ($15.2 million net of
     tax) of amortization of intangible
     assets related to the acquisition of
     Medco for the three months and year
     ended December 31, 2012,
     respectively.

    In addition, net income from
     discontinued operations, net of tax
     for the three months and year ended
     December 31, 2012, respectively
     includes a benefit of $3.7 million
     ($2.3 million net of tax) and charges
     of $7.8 million ($4.8 million net of
     charges) in conjunction with the
     strategic decision to exit various
     businesses.

    (10) Adjusted EPS will exclude
     amortization of intangible assets.
     The current estimate of full year
     amortization based on the preliminary
     purchase price allocation for the
     Medco transaction. The preliminary
     purchase price allocation may be
     subject to further refinement and may
     result in significant changes.

    (11) Adjusted EPS will exclude Medco-
     related transaction, integration and
     other non-recurring costs, including
     premium on early retirement of debt.
     The full-year impact of these costs
     have yet to be determined.

                         Appendix
                     Additional Notes

    The Company now recognizes net income attributable
     to non-controlling interest which represents the
     share of net income allocated to members in
     consolidated affiliates. This share of net income
     was previously included within selling, general
     and administrative costs on the consolidated
     statement of operations. This classification
     impacted all quarters in 2012 and the third and
     fourth quarters of 2011 and did not impact net
     income attributable to Express Scripts
     shareholders.

    During the fourth quarter of 2012, the Company
     determined that portions of the business within
     the Other Business Operations segment were not
     core to future operations and committed to a plan
     to dispose of these businesses. Consequently,
     results for the year ended December 31, 2012 have
     been adjusted for the discontinued operations of
     these businesses. This adjustment for
     discontinued operations impacts the second, third
     and fourth quarters of 2012.

    Consult the Investor Information section of the
     Express Scripts website for the 2012 Express
     Scripts Recast worksheet, a document that recasts
     historical information reflecting these changes
     as www.express-scripts.com/corporate

SOURCE Express Scripts Holding Company


Source: PR Newswire