St, Louis, MO – Express Scripts Holding Company (Nasdaq: ESRX) recently announced 2016 fourth quarter and full year net income of $1,434.7 million and $3,404.4 million, respectively, or $2.34 and $5.39 per diluted share, respectively. 2016 fourth quarter and full year adjusted earnings per diluted share, as detailed in Table 4, was $1.88 and $6.39, respectively.
“We delivered another year of successful performance, not only through financial results, but by providing innovative solutions to help our patients and clients drive healthier outcomes and lower drug trends,” said Tim Wentworth, CEO and President. “In a year when the focus on drug pricing has never been greater, Express Scripts has held the 2016 growth rate in drug unit costs to 2.5% and lowered the patients’ share of total drug costs per prescription. The fundamentals of our business remain strong as our clinical focus and unwavering alignment with clients enables us to lead the industry in developing innovative value-based solutions that our country needs.”
In October 2016, we recognized a previously disclosed net tax benefit of approximately $511.0 million, or $0.81 per diluted share, related to the disposition of PolyMedica Corporation (Liberty). Following receipt of the tax benefit proceeds, the Board of Directors authorized the use of $41.2 million, approximately 8%, or $0.04 per share net of tax, of the PolyMedica tax benefit proceeds to reward employees for the significant contribution this multi-year effort provided the Company and its shareholders. This special, one-time, payment is excluded from our fourth quarter and full year 2016 adjusted SG&A, which impacts adjusted EBITDA and adjusted earnings per diluted share.
Fourth Quarter and Full Year 2016 Review
The following compares fourth quarter 2016 and 2015 operating results:
Adjusted claims of 354.9 million, down 6%, largely due to roll-off of the Coventry business – See Table 1
GAAP net income of $1,434.7 million, up 85%
GAAP earnings per diluted share of $2.34, up 107%
Adjusted EBITDA of $2,054.2 million, up 6% from 2015 adjusted EBITDA – See Table 3
Adjusted EBITDA per adjusted claim of $5.79, up 14% from 2015 adjusted EBITDA per adjusted claim – See Table 3
Adjusted net income of $1,153.0 million, up 8% – See Tables 5 and 5A
Adjusted earnings per diluted share of $1.88, up 21% – See Table 4
Net cash flow provided by operating activities of $2,248.9 million, down 22%
The following compares full year 2016 and 2015 operating results:
Adjusted claims of 1,407.6 million, down 2%
Excluding the impact of the Coventry roll off, adjusted claims were up 3%
GAAP net income of $3,404.4 million, up 37%
GAAP earnings per diluted share of $5.39, up 51%
Adjusted EBITDA of $7,260.4 million, up 3% from 2015 adjusted EBITDA – See Table 3
Adjusted EBITDA per adjusted claim of $5.16, up 6% from 2015 adjusted EBITDA per adjusted claim – See Table 3
Adjusted net income of $4,034.7 million, up 5% – See Tables 5 and 5A
Adjusted earnings per diluted share of $6.39, up 16% – See Table 4
Net cash flow provided by operating activities of $4,919.4 million, up 1%
Including shares received under our accelerated share repurchase agreements (executed in February 2016 and April 2015), the Company repurchased a total of 74.4 million shares under our share repurchase program for $5,571.9 million during 2016. In December 2016, the Board of Directors of the Company approved an increase in the authorized number of shares that may be repurchased under the share repurchase program by an additional 65.0 million shares.
As discussed publicly in December 2016, the Company revised its methodology for reporting adjusted network claims beginning with the year ending December 31, 2016. Specifically, the revised methodology includes an adjustment to reflect non-specialty network claims filled through our 90-day programs. These claims are now multiplied by three, as these claims, on average, typically cover a time period three times longer than other network claims. The change was made retrospectively for the three months and year ended December 31, 2016 and for the three months and year ended December 31, 2015, to facilitate a year-over-year comparison. A recast to the revised methodology is presented in an appendix and at the Investor Information section of Express Scripts’ web site.
The Company reaffirms its 2017 adjusted earnings per diluted share guidance in the range of $6.82 to $7.02, which represents growth of 8% over 2016 adjusted earnings per diluted share results at the mid-point of the range. The Company expects total adjusted claims for the first quarter of 2017 to be in the range of 345 million to 355 million. Adjusted earnings per diluted share for the first quarter of 2017 is estimated to be in the range of $1.30 to $1.34, which represents growth of 7% to 10% over the first quarter of 2016. Additional details on this guidance can be found in Table 6. For a discussion of the financial measures presented herein which are not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), see “Supplemental Information Regarding Non-GAAP Financial Measures” below.
The complete results release is available here: Express Scripts 2016 Fourth Quarter and Full Year Results