UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003. |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ |
Commission File Number: 0-20199
EXPRESS SCRIPTS, INC.
(Exact name of
registrant as specified in its charter)
| Delaware | 43-1420563 |
| (State of Incorporation) | (I.R.S. employer identification no.) |
13900 Riverport Dr., Maryland Heights, Missouri |
63043 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (314) 770-1666
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No
___
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes X
No
___
Common stock outstanding as of July 31, 2003: 78,588,894 Shares
EXPRESS SCRIPTS, INC.
INDEX
| Part I | Financial Information |
| Item 1. |
Financial Statements (unaudited) |
| a) |
Unaudited Consolidated Balance Sheet |
| b) |
Unaudited Consolidated Statement of Operations |
| c) |
Unaudited Consolidated Statement of Changes in Stockholders' Equity |
| d) |
Unaudited Consolidated Statement of Cash Flows |
| e) |
Notes to Unaudited Consolidated Financial Statements |
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
| Item 4. |
Controls and Procedures |
| Part II | Other Information |
| Item 1. |
Legal Proceedings |
| Item 2. |
Changes in Securities and Use of Proceeds - (Not Applicable) |
| Item 3. |
Defaults Upon Senior Securities - (Not Applicable) |
| Item 4. |
Submission of Matters to a Vote of Security Holders |
| Item 5. |
Other Information - (Not Applicable) |
| Item 6. |
Exhibits and Reports on Form 8-K |
| Signatures | |
| Index to Exhibits |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXPRESS SCRIPTS, INC.
Unaudited Consolidated
Balance Sheet
| (in thousands, except share data) | June 30, 2003 |
December 31, 2002 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 194,562 | $ | 190,654 | ||||
| Receivables, net | 990,090 | 988,544 | ||||||
| Inventories | 155,078 | 160,483 | ||||||
| Deferred taxes | 16,454 | 25,686 | ||||||
| Prepaid expenses and other current assets | 32,653 | 28,454 | ||||||
| Total current assets | 1,388,837 | 1,393,821 | ||||||
| Property and equipment, net | 172,551 | 168,973 | ||||||
| Goodwill, net | 1,420,752 | 1,378,436 | ||||||
| Other intangible assets, net | 241,189 | 251,111 | ||||||
| Other assets | 18,814 | 14,651 | ||||||
| Total assets | $ | 3,242,143 | $ | 3,206,992 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Claims and rebates payable | $ | 1,195,511 | $ | 1,084,906 | ||||
| Accounts payable | 151,755 | 255,245 | ||||||
| Accrued expenses | 167,340 | 200,356 | ||||||
| Current maturities of long-term debt | - | 3,250 | ||||||
| Total current liabilities | 1,514,606 | 1,543,757 | ||||||
| Long-term debt | 480,161 | 562,556 | ||||||
| Other liabilities | 110,970 | 97,824 | ||||||
| Total liabilities | 2,105,737 | 2,204,137 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, | ||||||||
| and no shares issued and outstanding | - | - | ||||||
| Common Stock, $0.01 par value per share, 181,000,000 shares | ||||||||
| authorized, and 79,798,000 and 79,834,000 shares issued and | ||||||||
| outstanding, respectively | 797 | 798 | ||||||
| Additional paid-in capital | 487,374 | 503,746 | ||||||
| Unearned compensation under employee compensation plans | (28,812 | ) | (8,179 | ) | ||||
| Accumulated other comprehensive income | 1,234 | (4,422 | ) | |||||
| Retained earnings | 732,577 | 614,950 | ||||||
| 1,193,170 | 1,106,893 | |||||||
| Common Stock in treasury at cost, 916,000 and 1,963,000 | ||||||||
| shares, respectively | (56,764 | ) | (104,038 | ) | ||||
| Total stockholders' equity | 1,136,406 | 1,002,855 | ||||||
| Total liabilities and stockholders' equity | $ | 3,242,143 | $ | 3,206,992 | ||||
See accompanying Notes to Unaudited Consolidated Financial Statements
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | 2003 | 2002 | 2003 | 2002 | ||||||||||
| Revenues | $ | 3,334,197 | $ | 3,167,524 | $ | 6,558,178 | $ | 5,718,546 | ||||||
| Cost of revenues | 3,116,962 | 2,955,420 | 6,131,330 | 5,331,785 | ||||||||||
| Gross profit | 217,235 | 212,104 | 426,848 | 386,761 | ||||||||||
| Selling, general and administrative | 106,955 | 121,311 | 208,741 | 217,698 | ||||||||||
| Operating income | 110,280 | 90,793 | 218,107 | 169,063 | ||||||||||
| Other (expense) income: | ||||||||||||||
| Undistributed loss from joint venture | (1,545 | ) | (1,033 | ) | (3,084 | ) | (2,070 | ) | ||||||
| Interest income | 721 | 1,319 | 1,589 | 2,379 | ||||||||||
| Interest expense | (14,040 | ) | (11,654 | ) | (24,742 | ) | (19,782 | ) | ||||||
| (14,864 | ) | (11,368 | ) | (26,237 | ) | (19,473 | ) | |||||||
| Income before income taxes | 95,416 | 79,425 | 191,870 | 149,590 | ||||||||||
| Provision for income taxes | 36,410 | 30,725 | 73,215 | 56,921 | ||||||||||
| Income before cumulative effect of accounting change | 59,006 | 48,700 | 118,655 | 92,669 | ||||||||||
| Cumulative effect of accounting change, net of tax | - | - | (1,028 | ) | - | |||||||||
| Net income | $ | 59,006 | $ | 48,700 | $ | 117,627 | $ | 92,669 | ||||||
| Basic earnings per share: | ||||||||||||||
| Before cumulative effect of accounting change | $ | 0.75 | $ | 0.62 | $ | 1.52 | $ | 1.19 | ||||||
| Cumulative effect of accounting change | - | - | (0.01 | ) | - | |||||||||
| Net income | $ | 0.75 | $ | 0.62 | $ | 1.51 | $ | 1.19 | ||||||
| Weighted average number of common shares | ||||||||||||||
| Outstanding during the period - Basic EPS | 78,366 | 78,367 | 77,959 | 78,029 | ||||||||||
| Diluted earnings per share: | ||||||||||||||
| Before cumulative effect of accounting change | $ | 0.74 | $ | 0.61 | $ | 1.49 | $ | 1.16 | ||||||
| Cumulative effect of accounting change | - | - | (0.01 | ) | - | |||||||||
| Net income | $ | 0.74 | $ | 0.61 | $ | 1.48 | $ | 1.16 | ||||||
| Weighted average number of common shares | ||||||||||||||
| Outstanding during the period - Diluted EPS | 80,021 | 80,277 | 79,366 | 79,941 | ||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Changes in Stockholders' Equity
| Number of Shares |
Amount | |||||||||||||||||||||||||
| (in thousands) | Common Stock |
Common Stock |
Additional Paid-in Capital |
Unearned Compensation Under Employee Compensation Plans |
Accumulated Other Comprehensive Income |
Retained Earnings |
Treasury Stock |
Total | ||||||||||||||||||
| Balance at December 31, 2002 | 79,834 | $ | 798 | $ | 503,746 | $ | (8,179 | ) | $ | (4,422 | ) | $ | 614,950 | $ | (104,038 | ) | $ | 1,002,855 | ||||||||
| Comprehensive income: | ||||||||||||||||||||||||||
| Net income | - | - | - | - | - | 117,627 | - | 117,627 | ||||||||||||||||||
| Other comprehensive income: | ||||||||||||||||||||||||||
| Foreign currency | ||||||||||||||||||||||||||
| translation adjustment | - | - | - | - | 4,642 | - | - | 4,642 | ||||||||||||||||||
| Realized and unrealized gains | ||||||||||||||||||||||||||
| on derivative financial | ||||||||||||||||||||||||||
| instruments, net of taxes | - | - | - | - | 1,014 | - | - | 1,014 | ||||||||||||||||||
| Comprehensive income | - | - | - | - | 5,656 | 117,627 | - | 123,283 | ||||||||||||||||||
| Treasury stock acquired | (45,228 | ) | (45,228 | ) | ||||||||||||||||||||||
| Changes in stockholders' equity | ||||||||||||||||||||||||||
| related to employee stock plans | (36 | ) | (1 | ) | (16,372 | ) | (20,633 | ) | - | - | 92,502 | 55,496 | ||||||||||||||
| Balance at June 30, 2003 | 79,798 | $ | 797 | $ | 487,374 | $ | (28,812 | ) | $ | 1,234 | $ | 732,577 | $ | (56,764 | ) | $ | 1,136,406 | |||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
EXPRESS SCRIPTS, INC.
Unaudited Consolidated
Statement of Cash Flows
| Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2003 |
2002 | ||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 117,627 | $ | 92,669 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization | 26,394 | 50,963 | ||||||
| Non-cash adjustments to net income | 48,546 | 31,014 | ||||||
| Net changes in operating assets and liabilities | (71,969 | ) | 20,868 | |||||
| Net cash provided by operating activities | 120,598 | 195,514 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (21,562 | ) | (23,001 | ) | ||||
| Acquisitions, net of cash acquired, and investment in joint venture | 2,924 | (520,940 | ) | |||||
| Other | 10 | 508 | ||||||
| Net cash used in investing activities | (18,628 | ) | (543,433 | ) | ||||
| Cash flows from financing activities: | ||||||||
| (Repayment of) Proceeds from long-term debt, net | (85,430 | ) | 360,000 | |||||
| Treasury stock acquired | (45,228 | ) | ||||||