Express Scripts, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ESRX)") else Response.Write("(NASDAQ: ESRX)") end if %>
14000 Riverport Drive
Maryland Heights, MD 63043
(314) 770-1666
http://www.express-scripts.com
UNION CITY, Ca., October 27, 1996/FOOLWIRE/ --- Express Scripts released their third quarter 1996 results on Friday, October 25th. They were up 45% in terms of earnings per share with $4.8 million or $0.42 per share. This beat analyst estimates by a penny per share. Their revenues were up 40% and both network and mail-order scripts on a utilization basis were up about 30% for the quarter. Revenues for the quarter were $184 million up from $138 million last year. Gross profit margin was 11.3%, down about 0.5% from last year and they are down about a point on the gross profit line. But they are getting benefits from economies of scale and expense control, so there is very little of this that flows through to net income.
MEMBERSHIP INCREASES for the quarter were up about 17% and they think that the revenues growing at a faster rate than membership reflects, in part, the greater utilization by their membership of their network which then puts them at risk for the claim costs and they record the ingredients for those members in their topline in their revenue. That accounts for the higher growth in revenue than in the absolute growth in membership.
OTHER CONTRIBUTING FACTORS. Their Canadian operations continue to mature. They had good quarters for both their infusion and their vision programs and their growth was roughly consistent with the growth in the PBM.
PPS ACCOMPLISHMENTS. They announced during the quarter that their subsidiary, Practice Pattern Science, completed a contract with Bristol-Myers Squibb. PPS continues to develop both from a marketing perspective and from a product development perspective. On the marketing side, PPS is active in the market and are in negotiations with several other manufacturers and with several HMOs and insurance carriers.
During the quarter, PPS completed the programming of its module which they call Patient CareView. PPS is an episode of care medical information management program and previously they had completed the programs which they call GlobalView which allows them to look at a population and determine what their characteristics are in terms of who has what diseases, what percentage of the population has asthma, what percentage of the population has diabetes, for example for 900 different diseases.
They had also previously completed their profiling tool which allows them to look at how physicians, individual physicians, treat people with specific diseases. During this last quarter, PPS completed the programming on the Patient CareView module which is a module that looks at how individual patients are receiving care within each of those disease categories. So now they can profile a population, look at the number of people and how they are being treated, and then track individual behaviors and this will perform a useful service as the underpinnings of a disease management program. They think that, as they look ahead, they will now be able to provide a stronger link between the PBM and PPS in terms of designing programs for disease management.
MEMBERSHIP. By the end of the third quarter they had increased to 9.5 million members. This is up from 9.2 million at the end of the second quarter and 8.1 million at the end of 1995. The 300,000 entries during the quarter is net of a 340,000 member loss due to the industry consolidation in the HMO sector. They noted that their Premier lives are now up to 700,000. This includes 200,000 new Premier members not included in the 9.5 million since they were added in October. Also, on January 1st they expect to lose about 500,000 more HMO lives, but as in the third quarter, they expect to more than offset those with new sales.
Their sales pipeline is good. There are always uncertainties in finalizing deals but they feel comfortable with the statement that they will more than offset those lost members.
BALANCE SHEET. They continue to exhibit a very strong balance sheet at the end of the third quarter. Once again, the receivables increased by about $16.7 million during the quarter which is just under 12% and is in keeping with the growth that they reported. Inventories are up almost $2.5 million. The preponderance of the growth is at their Tempe facility and that is in keeping with the mail order growth and the number of mail order scripts that they are filling as they get more business. The bulk of the increases in their current assets were paid for by increases in the claims payable and the other current liabilities. They continue to strive to get their number of days in receivables down and their number of days sales in their inventories down. They are in the process of putting in a new inventory system that will be in place by the end of the year that should help them in that endeavor.
STOCK REPURCHASE PROGRAM. After deliberations with their board they have gotten permission to repurchase Express Scripts shares. At some point their share value for repurchasing ESI stock becomes very attractive to them. They have, therefore, got approval to repurchase their shares if they believe it is a good investment. They still, despite the fact that they have an authorized stock repurchase program, they still want to say that they think that there are still some attractive alternative as far as uses of the proceeds from their recent public offering and their other cash, in addition to the stock repurchase program. They expect they will have cash from those sources to make acquisitions if attractive candidates can be found.
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