Express Scripts Announces 2018 First Quarter Results

Thursday, May 3, 2018 General News
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 Footnotes to Press Release 

(1)  The Company's core business excludes the contributions from Coventry and Catamaran, as well as Anthem, to which we refer together as the "Transitioning Clients."  Amounts attributable to each of the Transitioning Clients are based on management's estimates regarding, among other items, cost allocation and may not be indicative of costs actually incurred as a result of servicing each of the Transitioning Clients. Both direct and indirect costs were allocated based on management's best estimates of costs attributable to servicing each of the Transitioning Clients, and, where appropriate, are based on actual cost or adjusted claims attributable to each of the Transitioning Clients.  

(2) Total adjusted network claims includes an adjustment to reflect non-specialty network claims filled through our 90-day programs.  These claims are multiplied by three, as these claims, on average, typically cover a time period three times longer than other network claims.  Home delivery claims are also multiplied by three, as home delivery claims typically cover a time period three times longer than unadjusted network claims.  

(3)  Includes home delivery and specialty claims including drugs distributed to other PBMs' clients under limited distribution contracts with pharmaceutical manufacturers and Freedom Fertility claims. 

(4) Amortization of intangible assets includes amounts in both revenues and selling, general and administrative expense. Revenue amortization is related to the customer contract with Anthem, which commenced upon closing the NextRx acquisition in 2009.  Amortization of intangibles that arises in connection with consideration given to a customer by a vendor is characterized as a reduction of revenues.  Intangible amortization of $55.4 million ($42.3 million net of tax) and $55.4 million ($35.0 million net of tax) is included as a reduction to revenue for the three months ended March 31, 2018 and 2017, respectively. Selling, general, and administrative expense includes the amortization of other intangible assets and computer software acquired through business combinations, of $355.4 million ($271.6 million net of tax) and $307.0 million ($194.2 million net of tax) for the three months ended March 31, 2018 and 2017, respectively.   

(5) Transaction costs include those costs directly related to the acquisition of eviCore and the proposed transaction of Cigna. Costs of $35.4 million ($27.0 million net of tax) are primarily composed of professional fees and other compensation costs, and are included in selling, general and administrative expense for the three months ended March 31, 2018.  

(6) Costs included in cost of revenues (gross profit), primarily comprised of professional fees, severance and other business activity charges in connection with the enterprise value initiative, are $5.3 million ($4.0 million net of tax) for the three months ended March 31, 2018. Costs included in selling, general and administrative, primarily comprised of professional fees, severance and other business activity charges in connection with the enterprise value initiative, are $12.4 million ($9.5 million net of tax) for the three months ended March 31, 2018.  

(7)  Costs included in selling, general and administrative, related to charitable contributions made as a result of the tax savings received as part of the 2017 federal tax reform, are $30.0 million ($22.9 million net of tax) for the three months ended March 31, 2018.

(8) Provision for income taxes includes discrete income tax charges of $1.2 million and $29.9 million for the three months ended March 31, 2018 and 2017, respectively. The 2018 net discrete income tax charge primarily relates to change in unrecognized tax benefits. The 2017 net discrete income tax charge primarily relates to changes in unrecognized tax benefits and a revaluation of our net deferred tax attributes.  

(9) Represents adjustment for the tax impact related to non-GAAP items excluded from adjusted diluted EPS.  See Table 5 and 5A for calculation of adjusted effective income tax rate.  

(10)  Consolidated revenues and Transitioning Clients revenues include intangible amortization related to the customer contract with Anthem of $55.4 million for each of the three months ended March 31, 2018 and 2017.  



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