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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Delaware
(State or other jurisdiction of incorporation)
1-31312 22-3461740
(Commission File Number) (I.R.S. Employer Identification No.)
TABLE OF CONTENTS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
EXHIBIT INDEX
Exhibit 99.1
(GRAPHIC)
Conference Call
Management will hold a conference call to review Medco’s financial results and operating outlook on Feb. 24, 2009 at 8:30 a.m. ET.
To access the live conference call via telephone:
Dial in: (800) 949-5383 from inside the U.S., or (706) 679-3440 from outside the U.S.
To access the live webcast:
Visit the Investor Relations section at www.medco.com/investor.
For a replay of the call:
A replay of the call will be available after the event on Feb. 24, 2009 through Mar. 12, 2009. Dial in: (800) 642-1687 from inside the U.S., or
(706) 645-9291 from outside the U.S. Please use pass code 81418966.
About Medco
Medco Health Solutions, Inc. (NYSE: MHS) is a leading health care company, serving the needs of more than 60 million people. Medco, the
world’s most advanced pharmacy®, provides clinically driven pharmacy services designed to improve the quality of care and lower total
health care costs for private and public employers, health plans, labor unions and government agencies of all sizes, and for individuals served
by Medicare Part D Prescription Drug Plans. Through its unique Medco Therapeutic Resource Centers® and the Accredo Health Group,
Medco’s specialty pharmacy, the company is creating innovative models for the care of patients with chronic and complex conditions. Medco
is a leader in the emerging field of personalized medicine and in applying evidence-based protocols to elevate the practice of pharmacy, a key
element in reforming America’s health care system. Medco is ranked number 51 on the Fortune 500 list, with 2008 revenues of more than
$51 billion. For more information about Medco, go to http://www.medcohealth.com.
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Cost of operations:
Cost of product net revenues (Includes retail co-payments of
$1,836 and $1,849 in the fourth quarters of 2008 and 2007,
and $7,666 and $7,553 in the full years ended 2008 and
2007) 11,916.5 10,557.5 47,308.2 41,402.6
Cost of service revenues 74.7 54.7 221.4 158.3
Total cost of revenues 11,991.2 10,612.2 47,529.6 41,560.9
Selling, general and administrative expenses 381.0 328.6 1,425.0 1,114.1
Amortization of intangibles 73.9 64.2 285.1 228.1
Interest expense 60.0 45.5 233.7 134.2
Interest (income) and other (income) expense, net (2.4) (8.1) (6.2) (34.4)
Total costs and expenses 12,503.7 11,042.4 49,467.2 43,002.9
Income before provision for income taxes 457.6 336.0 1,790.8 1,503.3
Provision for income taxes 183.2 128.4 687.9 591.3
Table 3.
Table 4.
(1) Includes majority-owned Europa Apotheek’s operating results commencing on the April 28, 2008
acquisition date.
(2) Includes PolyMedica’s and Critical Care’s operating results commencing on the October 31, 2007 and
November 14, 2007 acquisition dates, respectively, and for subsequent periods.
(3) Includes retail co-payments of $1,836 million and $1,849 million for the fourth quarters of 2008 and
2007, and $7,666 million and $7,553 million for the full years ended 2008 and 2007.
(4) Please refer to Table 8 for reconciliation of the earnings per share excluding intangible amortization.
(5) Defined as net revenues minus cost of revenues.
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Table 5.
Quarter Ended Quarter Ended Full Year Ended Full Year Ended
December 27, December 29, December 27, December 29,
2008 (1) Increase (Decrease) 2007 (2) 2008 (1) Increase (Decrease) 2007 (2)
Volume
Information
Retail prescriptions 118.3 1.2 1.0% 117.1 480.2 15.2 3.3% 465.0
Mail-order
prescriptions 26.7 2.3 9.4% 24.4 105.8 11.0 11.6% 94.8
Total
prescriptions 145.0 3.5 2.5% 141.5 586.0 26.2 4.7% 559.8
Adjusted
prescriptions (3) 198.1 8.1 4.3% 190.0 795.9 47.6 6.4% 748.3
Adjusted mail-order
penetration (4) 40.3% 1.9% 38.4% 39.7% 1.8% 37.9%
Generic
Dispensing Rate
Information
Retail generic
dispensing rate 67.0% 3.4% 63.6% 66.0% 4.3% 61.7%
Mail-order generic
dispensing rate 55.9% 5.0% 50.9% 55.0% 5.0% 50.0%
Overall generic
dispensing rate 64.9% 3.5% 61.4% 64.1% 4.4% 59.7%
Manufacturer
Rebate
Information
Rebates earned $ 1,206 $ 338 38.9% $ 868 $ 4,447 $ 886 24.9% $ 3,561
Percent of rebates
retained 15.9% 1.4% 14.5% 18.1% 2.7% 15.4%
Depreciation
Information
Cost of revenues
depreciation $ 10.4 $ 1.9 22.4% $ 8.5 $ 42.3 $ (1.5) -3.4% $ 43.8
SG&A expenses
depreciation 29.5 (6.5) -18.1% 36.0 115.4 (9.7) -7.8% 125.1
Total depreciation $ 39.9 $ (4.6) -10.3% $ 44.5 $ 157.7 $ (11.2) -6.6% $ 168.9
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(1) Includes majority-owned Europa Apotheek’s operating results commencing on the April 28, 2008
acquisition date.
(2) Includes PolyMedica’s and Critical Care’s operating results commencing on the October 31, 2007 and
November 14, 2007 acquisition dates, respectively, and for subsequent periods.
(3) Adjusted prescription volume equals the majority of mail-order prescriptions multiplied by three, plus
retail prescriptions. These mail-order prescriptions are multiplied by three to adjust for the fact that they
include approximately three times the amount of product days supplied compared with retail
prescriptions.
(4) The percentage of adjusted mail-order prescriptions to total adjusted prescriptions.
(5) Represents over-the-counter drugs, as well as diabetes supplies primarily dispensed by PolyMedica.
* Not meaningful
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Table 6.
(1) Includes majority-owned Europa Apotheek’s operating results commencing on the April 28, 2008
acquisition date.
(2) Includes PolyMedica’s and Critical Care’s operating results commencing on the October 31, 2007 and
November 14, 2007 acquisition dates, respectively, and for subsequent periods.
(3) Includes a $9.8 million charge for the ineffective portion of the forward-starting interest rate swap
agreements associated with the March 2008 issuance of senior notes.
(4) Includes a third-quarter 2008 net nonrecurring state income tax benefit of $28 million primarily from
statute of limitations expirations in certain states.
(5) Adjusted prescription volume equals the majority of mail-order prescriptions multiplied by three, plus
retail prescriptions. These mail-order prescriptions are multiplied by three to adjust for the fact that they
include approximately three times the amount of product days supplied compared with retail
prescriptions.
Table 7.
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Quarter Ended Quarter Ended Full Year Ended Full Year Ended
December 27, December 29, December 27, December 29,
2008 Increase (Decrease) 2007 (1) 2008 Increase (Decrease) 2007 (1)
Specialty
Pharmacy:
Product net
revenues $ 2,065.8 $ 484.1 30.6% $ 1,581.7 $ 7,897.7 $ 1,917.2 32.1% $ 5,980.5
Service revenues 22.1 5.3 31.5% 16.8 76.5 14.3 23.0% 62.2
Total net
revenues 2,087.9 489.4 30.6% 1,598.5 7,974.2 1,931.5 32.0% 6,042.7
Total cost of
revenues 1,923.2 452.1 30.7% 1,471.1 7,343.4 1,780.2 32.0% 5,563.2
Selling, general
and
administrative
expenses 81.6 14.5 21.6% 67.1 305.0 75.2 32.7% 229.8
Amortization of
intangibles 11.3 0.8 7.6% 10.5 44.6 5.1 12.9% 39.5
Operating Income $ 71.8 $ 22.0 44.2% $ 49.8 $ 281.2 $ 71.0 33.8% $ 210.2
Gross Margin (2) $ 164.7 $ 37.3 29.3% $ 127.4 $ 630.8 $ 151.3 31.6% $ 479.5
Gross margin
percentage 7.9% -0.1% 8.0% 7.9% — 7.9%
(1) Includes Critical Care’s operating results commencing on the November 14, 2007 acquisition date, and
for subsequent periods.
(2) Defined as net revenues minus cost of revenues.
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Table 8.
(1) This adjustment represents the per share effect of the intangible amortization from the 2003 spin-off, when
Medco became a publicly traded company.
Table 9.
Diluted earnings per share growth over prior year 31% 15% 20%
Diluted earnings per share growth over prior year,
excluding intangible amortization 28% 15% 19%
(1) This adjustment represents the per share effect of the intangible amortization from the 2003 spin-off, when
Medco became a publicly traded company.