Medco Health Solutions Inc. (MHS, Financial) filed Quarterly Report for the period ended 2009-06-27.
Our total net revenues increased 16.9% to $14,930.4 million for the second quarter, and increased 15.6% to $29,764.3 million for the six months of 2009. Product net revenues increased 16.8% to $14,729.6 million for the second quarter, and 15.5% to $29,345.8 million for the six months of 2009, which reflects product price inflation primarily on brand-name drugs, as well as higher retail volume driven by new business, partially offset by a greater representation of lower-priced generic drugs and higher client price discounts. Additionally, our service revenues increased 19.9% to $200.8 million for the second quarter, and 29.3% to $418.5 million for the six months of 2009, which reflects higher client and other service revenues primarily from higher claims processing administrative fees. Higher revenue associated with Medicare Part D-related product offerings, as well as increased revenues from clinical programs, data sales and formulary management fees, also contributed to the increase in client and other service revenues.
Amortization of intangible assets of $75.9 million for the second quarter and $151.8 million for the six months of 2009 increased $5.3 million and $11.7 million, respectively, from the second quarter and six months of 2008, primarily as a result of additional intangible amortization from PolyMedica associated with the Liberty trade name and patient list acquisitions. In addition, there was increased intangible amortization as a result of the acquisition of the majority interest in Europa Apotheek.
Interest expense of $43.4 million for the second quarter and $88.5 million for the six months of 2009 decreased $18.2 million and $23.7 million, respectively, from the second quarter and six months of 2008, primarily reflecting lower interest rates on the floating rate components of outstanding debt.
Interest (income) and other (income) expense, net, of ($2.2) million for the second quarter decreased $1.9 million from the second quarter of 2008 reflecting lower interest rates on higher cash balances. Interest (income) and other (income) expense, net, of ($5.7) million for the six months of 2009 increased $5.3 million from ($0.4) million in the six months of 2008, primarily attributable to a first-quarter 2008 charge for the ineffective portion of the forward-starting interest rate swap agreements associated with our March 2008 issuance of senior notes, which is described further below under Liquidity and Capital ResourcesSwap Agreements. This is partially offset by decreased interest income reflecting lower interest rates on higher cash balances.
In addition to premiums, there are certain co-payments and deductibles (the cost share) due from members based on prescription orders by those members, some of which are subsidized by CMS in cases of low-income membership. For subsidies received in advance, the amount is deferred and recorded in accrued expenses and other current liabilities on the consolidated balance sheets. If there is cost share due from members or CMS, the amount is accrued and recorded in client accounts receivable, net, on the consolidated balance sheets. After the end of the contract year and based on actual annual drug costs incurred, cost share amounts are reconciled with CMS and the corresponding receivable or payable is settled. The cost share is treated consistently as other co-payments derived from providing PBM services, as a component of product net revenues on the consolidated statements of income where the requirements of Emerging Issues Task Force (EITF) No. 99-19, Reporting Gross Revenue as a Principal vs. Net as an Agent, are met. For further details, see our critical accounting policies included in Use of Estimates and Critical Accounting Policies and Estimates and Note 2, Summary of Significant Accounting Policies, to our audited consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 27, 2008. In the second quarter and six months of 2009, premium revenues for our PDP products, which exclude member cost share, were $148 million and $291 million, respectively, or less than 1% of total net revenues. In the second quarter and six months of 2008, premium revenues for our PDP products, which exclude member cost share, were $89 million and $171 million, respectively, or less than 1% of total net revenues.
Read the The complete Report
Highlight of Business Operations:
Our diluted earnings per share increased 25.5% to $0.64 and net income increased 18.8% to $312.1 million for the second quarter of 2009 compared to $0.51 per share and $262.7 million, respectively, for the second quarter of 2008. Our diluted earnings per share increased 20.8% to $1.22 and net income increased 13.2% to $603.2 million for the six months of 2009 compared to $1.01 per share and $532.9 million, respectively, for the six months of 2008. These increases primarily reflect higher generic dispensing rates, favorable retail pharmacy reimbursement rates and retail volumes, growth in the Specialty Pharmacy business and service margin, as well as a decrease in the diluted weighted average shares outstanding. These are partially offset by lower mail-order volumes, steeper client price discounts associated with new clients and renewals of existing clients, and decreased manufacturer rebate retention rates. In addition, these results include the operating results of majority-owned Europa Apotheek commencing on the April 28, 2008 acquisition date. For the six months ended June 27, 2009, we generated cash flow from operations of $2,265.5 million and had cash and cash equivalents of $2,085.5 million on our unaudited interim condensed consolidated balance sheet at June 27, 2009.Our total net revenues increased 16.9% to $14,930.4 million for the second quarter, and increased 15.6% to $29,764.3 million for the six months of 2009. Product net revenues increased 16.8% to $14,729.6 million for the second quarter, and 15.5% to $29,345.8 million for the six months of 2009, which reflects product price inflation primarily on brand-name drugs, as well as higher retail volume driven by new business, partially offset by a greater representation of lower-priced generic drugs and higher client price discounts. Additionally, our service revenues increased 19.9% to $200.8 million for the second quarter, and 29.3% to $418.5 million for the six months of 2009, which reflects higher client and other service revenues primarily from higher claims processing administrative fees. Higher revenue associated with Medicare Part D-related product offerings, as well as increased revenues from clinical programs, data sales and formulary management fees, also contributed to the increase in client and other service revenues.
Amortization of intangible assets of $75.9 million for the second quarter and $151.8 million for the six months of 2009 increased $5.3 million and $11.7 million, respectively, from the second quarter and six months of 2008, primarily as a result of additional intangible amortization from PolyMedica associated with the Liberty trade name and patient list acquisitions. In addition, there was increased intangible amortization as a result of the acquisition of the majority interest in Europa Apotheek.
Interest expense of $43.4 million for the second quarter and $88.5 million for the six months of 2009 decreased $18.2 million and $23.7 million, respectively, from the second quarter and six months of 2008, primarily reflecting lower interest rates on the floating rate components of outstanding debt.
Interest (income) and other (income) expense, net, of ($2.2) million for the second quarter decreased $1.9 million from the second quarter of 2008 reflecting lower interest rates on higher cash balances. Interest (income) and other (income) expense, net, of ($5.7) million for the six months of 2009 increased $5.3 million from ($0.4) million in the six months of 2008, primarily attributable to a first-quarter 2008 charge for the ineffective portion of the forward-starting interest rate swap agreements associated with our March 2008 issuance of senior notes, which is described further below under Liquidity and Capital ResourcesSwap Agreements. This is partially offset by decreased interest income reflecting lower interest rates on higher cash balances.
In addition to premiums, there are certain co-payments and deductibles (the cost share) due from members based on prescription orders by those members, some of which are subsidized by CMS in cases of low-income membership. For subsidies received in advance, the amount is deferred and recorded in accrued expenses and other current liabilities on the consolidated balance sheets. If there is cost share due from members or CMS, the amount is accrued and recorded in client accounts receivable, net, on the consolidated balance sheets. After the end of the contract year and based on actual annual drug costs incurred, cost share amounts are reconciled with CMS and the corresponding receivable or payable is settled. The cost share is treated consistently as other co-payments derived from providing PBM services, as a component of product net revenues on the consolidated statements of income where the requirements of Emerging Issues Task Force (EITF) No. 99-19, Reporting Gross Revenue as a Principal vs. Net as an Agent, are met. For further details, see our critical accounting policies included in Use of Estimates and Critical Accounting Policies and Estimates and Note 2, Summary of Significant Accounting Policies, to our audited consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 27, 2008. In the second quarter and six months of 2009, premium revenues for our PDP products, which exclude member cost share, were $148 million and $291 million, respectively, or less than 1% of total net revenues. In the second quarter and six months of 2008, premium revenues for our PDP products, which exclude member cost share, were $89 million and $171 million, respectively, or less than 1% of total net revenues.
Read the The complete Report
