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Express Scripts

Express Scripts. Ian Johnston. ESRX Background. PBM – Processes prescriptions for groups that pay for drugs (insurance companies or corporations) Services Processing prescriptions Mail-order pharmacy Negotiating lower prices with drug makers and sellers Formulary management

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Express Scripts

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  1. Express Scripts Ian Johnston

  2. ESRX Background • PBM – Processes prescriptions for groups that pay for drugs (insurance companies or corporations) • Services • Processing prescriptions • Mail-order pharmacy • Negotiating lower prices with drug makers and sellers • Formulary management • Pass on cost savings to customers and take a cut

  3. Presentation outline • Footnote Disclosure Analysis • Deferred taxes and liabilities • Property, plant, and equipment • Goodwill • Intangible assets • Pension and other postretirement benefits • Debt • Segment and product line reporting • Effective tax rate • Expanded Income Statement

  4. Net deferred tax liability of $4,985

  5. Deferred Taxes Schedule

  6. Footnote Reconciliation to Balance Sheet No implied asset or liability exists

  7. PPE Footnote

  8. Goodwill ~$34 of goodwill was written off in 2013. ~$107 of goodwill was eliminated due to sales of business lines.

  9. Intangible Assets

  10. Pension Obligations Interesting note: Express Scripts did not have a defined benefit plan, but inherited Medco’s plan through the merger. ESRX financial notes do not disclose a schedule of “other” or “accrued expenses.”

  11. Debt footnote Detailed information about each debt offering (maturity, principal, interest rate) No disclosure of average interest rate Disclosure not helpful in expanding balance sheet or aiding WACC calculation

  12. Detailed Revenue and Segment Information

  13. Income Tax Rate • Two options for effective tax rate • Assume 37% (35% statutory plus 2% other) • Effective tax rate disclosure • Adjustments to statutory rate are not related to financing • Continue to use 37%, which is almost identical to the effective tax rate

  14. Updated Income Statement More detailed revenue breakdown will make it easier to project sales growth.

  15. Information Not Available • Breakdown of COGS • Extremely large income statement number – what is it comprised of? • Breakdown of SG&A • Advertising, R&D, etc? • Breakdown of “other assets” and “other liabilities” • Average interest on outstanding debt

  16. Questions?

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