Express Scripts Announces 2017 Second Quarter Results

Anthem and Transitioning Clients¹

Q2 2017
(Excluding
Anthem and
Transitioning
Clients)¹

Adjusted claims

350.0

58.4

0.7

290.9

Revenues²

$25,347.5

$4,739.1

$148.4

$20,460.0

Net Income

$801.8

N/A

N/A

N/A

EBITDA³

$1,824.1

$609.1

$44.4

$1,170.6

EBITDA per adjusted claim³

$5.21

$10.43

N/A

$4.02

* Includes $52.6 million payment related to the structure of the Anthem contract. 

See "Footnotes to Press Release," below.

 EXPRESS SCRIPTS HOLDING COMPANY 

 Unaudited Consolidated Statement of Operations 

 Three Months Ended
June 30, 

 Six Months Ended
June 30, 

  (in millions, except per share data) 

2017

2016

2017

2016

Revenues^*

$ 25,347.5

$ 25,222.3

$ 50,002.4

$ 50,014.1

Cost of revenues^*

23,186.3

23,061.1

45,968.5

46,005.9

    Gross profit 

2,161.2

2,161.2

4,033.9

4,008.2

Selling, general and administrative

782.6

904.9

1,600.7

1,811.1

Operating income

1,378.6

1,256.3

2,433.2

2,197.1

Other (expense) income:

    Interest income and other 

8.8

10.3

15.1

19.1

    Interest expense and other 

(146.5)

(136.8)

(292.2)

(275.4)

(137.7)

(126.5)

(277.1)

(256.3)

Income before income taxes

1,240.9

1,129.8

2,156.1

1,940.8

Provision for income taxes

435.4

402.7

800.3

681.5

Net income 

805.5

727.1

1,355.8

1,259.3

Less: Net income attributable to non-controlling interest

3.7

6.4

7.7

12.5

Net income attributable to Express Scripts

$      801.8

$      720.7

$   1,348.1

$   1,246.8

Weighted-average number of common shares

 outstanding during the period: 

    Basic 

582.9

631.3

591.9

638.1

    Diluted 

585.6

635.7

595.4

642.7

Earnings per share attributable to Express Scripts:

     Basic

$        1.38

$        1.14

$        2.28

$        1.95

     Diluted

$        1.37

$        1.13

$        2.26

$        1.94

* Includes retail pharmacy co-payments of $2,017.6 million and $2,136.4 million for the three months ended June 30, 2017 and 2016, respectively, and $4,483.9 million and $4,677.4 million for the six months ended June 30, 2017 and 2016, respectively.

 EXPRESS SCRIPTS HOLDING COMPANY

 Unaudited Consolidated Balance Sheet 

 June 30,  

 December 31,  

 (in millions) 

2017

2016

 Assets 

 Current assets: 

 Cash and cash equivalents 

$   2,352.5

$            3,077.2

 Receivables, net 

7,067.5

7,062.1

 Inventories 

1,918.7

1,959.0

 Prepaid expenses and other current assets 

298.1

265.1

    Total current assets 

11,636.8

12,363.4

 Property and equipment, net 

1,255.2

1,273.6

 Goodwill 

29,425.5

29,277.8

 Other intangible assets, net 

8,063.9

8,636.9

 Other assets 

132.0

193.2

    Total assets 

$ 50,513.4

$          51,744.9

 Liabilities and stockholders' equity 

 Current liabilities: 

 Claims and rebates payable 

$   9,081.1

$            8,836.9

 Accounts payable 

4,383.6

3,875.7

 Accrued expenses 

2,163.3

2,993.2

 Current maturities of long-term debt 

1,151.3

722.3

    Total current liabilities 

16,779.3

16,428.1

 Long-term debt 

13,835.2

14,846.0

 Deferred taxes 

3,471.2

3,603.3

 Other liabilities 

677.6

623.7

    Total liabilities 

34,763.3

35,501.1

 Stockholders' equity: 

 Preferred stock, 15.0 shares authorized, $0.01 par value per share;   

 no shares issued and outstanding 

-

-

 Common stock, 2,985.0 shares authorized, $0.01 par value per share;  

 shares issued: 861.3 and 857.5, respectively; 

 shares outstanding: 577.5 and 605.5, respectively 

8.6

8.6

 Additional paid-in capital 

23,446.8

23,233.6

 Accumulated other comprehensive loss 

(7.6)

(12.3)

 Retained earnings 

13,149.3

11,801.2

36,597.1

35,031.1

 Common stock in treasury at cost, 283.8 and 252.0 shares, respectively  

(20,852.5)

(18,795.1)

    Total Express Scripts stockholders' equity 

15,744.6

16,236.0

 Non-controlling interest 

5.5

7.8

    Total stockholders' equity 

15,750.1

16,243.8

    Total liabilities and stockholders' equity 

$ 50,513.4

$          51,744.9

 EXPRESS SCRIPTS HOLDING COMPANY 

 Unaudited Consolidated Statement of Cash Flows 

 Six Months Ended
June 30, 

 (in millions) 

2017

2016

 Cash flows from operating activities: 

 Net income 

$ 1,355.8

$ 1,259.3

 Adjustments to reconcile net income to net cash provided by operating activities: 

 Depreciation and amortization 

894.8

1,073.5

 Deferred income taxes 

(175.6)

(212.3)

 Employee stock-based compensation expense 

52.1

54.7

 Other, net 

20.4

(4.5)

 Changes in operating assets and liabilities:  

 Accounts receivable 

(26.2)

(670.6)

 Inventories 

40.3

307.4

 Other current and noncurrent assets 

(23.6)

(74.5)

 Claims and rebates payable 

240.2

(761.8)

 Accounts payable 

475.4

751.1

 Accrued expenses 

(818.0)

(452.6)

 Other current and noncurrent liabilities 

46.0

(79.6)

 Net cash flows provided by operating activities 

2,081.6

1,190.1

 Cash flows from investing activities: 

 Acquisitions, net of cash acquired 

(122.7)

-

 Purchases of property and equipment 

(105.3)

(158.5)

 Other, net 

(7.5)

(3.4)

 Net cash used in investing activities 

(235.5)

(161.9)

 Cash flows from financing activities: 

 Treasury stock acquired 

(2,020.0)

(3,320.2)

 Repayment of long-term debt 

(575.0)

(1,575.0)

 Net proceeds from employee stock plans 

37.5

35.9

 Proceeds from long-term debt, net of discounts 

-

1,991.0

 Excess tax benefit relating to employee stock-based compensation 

-

9.7

 Other, net 

(16.3)

(35.4)

 Net cash used in financing activities 

(2,573.8)

(2,894.0)

 Effect of foreign currency translation adjustment 

3.0

3.9

 Net decrease in cash and cash equivalents 

(724.7)

(1,861.9)

 Cash and cash equivalents at beginning of period 

3,077.2

3,186.3

 Cash and cash equivalents at end of period 

$ 2,352.5

$ 1,324.4

 Table 1 

  Express Scripts Holding Company Unaudited Consolidated Selected Information 

 (in millions) 

 Three Months Ended
June 30,  

 Six Months Ended
June 30,  

2017

2016

2017

2016

Claims Volume

Network

218.8

221.2

441.9

447.3

Home delivery and specialty⁽⁴⁾

29.5

29.5

58.5

59.8

   Total claims 

248.3

250.7

500.4

507.1

Adjusted network⁽⁵⁾

264.1

263.4

531.2

530.9

Adjusted home delivery and specialty⁽⁵⁾

85.9

85.9

170.5

174.7

   Total adjusted claims⁽⁵⁾

350.0

349.3

701.7

705.6

 Depreciation and Amortization (D&A):  

 Revenue amortization⁽⁶⁾

$   55.4

$   55.4

$ 110.8

$      89.7

 Cost of revenues depreciation 

32.3

29.1

64.3

58.0

 Selling, general and administrative depreciation 

52.8

55.4

104.0

108.5

 Selling, general and administrative amortization⁽⁶⁾

308.7

408.3

615.7

817.3

      Total D&A  

$ 449.2

$ 548.2

$ 894.8

$ 1,073.5

 Generic Fill Rate** 

 Network 

87.2%

86.3%

87.1%

86.1%

 Home delivery 

82.8%

80.9%

82.5%

80.3%

 Overall 

86.6%

85.6%

86.5%

85.4%

 See Footnotes to Tables 

**The home delivery generic fill rate is currently lower than the network generic fill rate as fewer generic substitutions are available among maintenance medications (e.g., therapies for chronic conditions) commonly dispensed from home delivery pharmacies compared to acute medications, which are primarily dispensed by pharmacies in our retail networks.

Table 2

Express Scripts Holding Company Unaudited Adjusted Gross Profit and Adjusted SG&A Reconciliation

Provided below are reconciliations of adjusted gross profit and adjusted selling, general and administrative expenses, which are non-GAAP measures, to gross profit and selling, general and administrative expenses, respectively, which are the most directly comparable measures calculated in accordance with GAAP.

(in millions)

 Three Months Ended
June 30,  

 Six Months Ended
June 30,  

2017

2016

2017

2016

Gross profit, as reported

$ 2,161.2

$ 2,161.2

$ 4,033.9

$ 4,008.2

Amortization of intangible assets ⁽⁶⁾

55.4

55.4

110.8

89.7

Adjusted gross profit

$ 2,216.6

$ 2,216.6

$ 4,144.7

$ 4,097.9

Selling, general and administrative, as reported

$    782.6

$    904.9

$ 1,600.7

$ 1,811.1

Amortization of intangible assets ⁽⁶⁾

308.7

408.3

615.7

817.3

Adjusted selling, general and administrative

$    473.9

$    496.6

$    985.0

$    993.8

 See Footnotes to Press Release 

 Table 3 

 Express Scripts Holding Company Unaudited EBITDA Reconciliation 

 (in millions, except per claim data) 

Provided below is a reconciliation of EBITDA attributable to Express Scripts, which is a non-GAAP financial measure, to net income attributable to Express Scripts.  The Company believes net income is the most directly comparable measure under GAAP.

 Three Months Ended
June 30,   

 Six Months Ended
June 30,  

2017

2016

2017

2016

Net income attributable to Express Scripts, as reported

$    801.8

$    720.7

$ 1,348.1

$ 1,246.8

  Provision for income taxes ⁽⁷⁾

435.4

402.7

800.3

681.5

  Depreciation and amortization ⁽⁶⁾

449.2

548.2

894.8

1,073.5

  Interest expense, interest income and other 

137.7

126.5

277.1

256.3

EBITDA attributable to Express Scripts

$ 1,824.1

$ 1,798.1

$ 3,320.3

$ 3,258.1

Total adjusted claims⁽⁵⁾

350.0

349.3

701.7

705.6

EBITDA attributable to Express Scripts, per adjusted claim

$      5.21

$      5.15

$      4.73

$      4.62

 See Footnotes to Press Release 

 Table 4 

 Express Scripts Holding Company Unaudited Adjusted Diluted EPS Reconciliation 

 Provided below is a reconciliation of Adjusted Diluted EPS attributable to Express Scripts, which is a non-GAAP measure, to diluted 

 EPS attributable to Express Scripts, which is its most directly comparable measure calculated in accordance with GAAP. 

 Three Months Ended
June 30,  

 Six Months Ended
June 30,  

2017

2016

2017

2016

Diluted EPS attributable to Express Scripts, as reported

$ 1.37

$ 1.13

$ 2.26

$ 1.94

Excluding items indicated: 

Debt redemption costs ^(8),*

-

-

-

0.02

Discrete tax items ⁽⁷⁾

(0.03)

(0.02)

0.02

(0.05)

Amortization of intangible assets ^(6),*

0.62

0.73

1.22

1.41

Tax impact of excluded items ⁽⁹⁾

(0.23)

(0.27)

(0.45)

(0.53)

Diluted EPS attributable to Express Scripts, adjusted

$ 1.73

$ 1.57

$ 3.05

$ 2.79

 See Footnotes to Press Release 

*Presented on a pre-tax basis.  A change to the presentation of this table was made to reflect the tax impact of non-GAAP excluded items as a single adjustment for the three and six months ended June 30, 2017 and 2016.

 Table 5 

 Express Scripts Holding Company Unaudited Adjusted Net Income and
Adjusted Effective Income Tax Rate Reconciliation 

 (in millions) 

 Presented below is a reconciliation of adjusted net income attributable to Express Scripts, which is a non-GAAP financial measure, to income before income taxes, which is its most directly comparable measure calculated in accordance with GAAP. 

 Three Months Ended
June 30, 2017 

 Six Months Ended
June 30, 2017 

Income
before
income
taxes

Provision
for income
taxes

Effective
income tax
rate

Income
before
income
taxes

Provision
for income
taxes

Effective
income tax
rate

Income before income taxes, as reported

$ 1,240.9

$     435.4

$ 2,156.1

$     800.3

Net income attributable to non-controlling interest

(3.7)

-

(7.7)

-

Income before income taxes attributable to Express Scripts

1,237.2

435.4

35.2%

2,148.4

800.3

37.3%

Excluding items indicated: 

Discrete tax items⁽⁷⁾

-

20.2

-

(9.7)

Amortization of intangible assets⁽⁶⁾

364.1

134.1

726.5

267.3

Income before income taxes attributable to Express Scripts, as adjusted

$ 1,601.3

$     589.7

36.8%

$ 2,874.9

$  1,057.9

36.8%

Adjusted net income attributable to Express Scripts

$ 1,011.6

$ 1,817.0

 See Footnotes to Press Release 

 Table 5A 

 Express Scripts Holding Company Unaudited Adjusted Net Income and
Adjusted Effective Income Tax Rate Reconciliation 

 (in millions) 

 Presented below is a reconciliation of adjusted net income attributable to Express Scripts, which is a non-GAAP financial measure, to income before income taxes, which is its most directly comparable measure calculated in accordance with GAAP. 

 Three Months Ended
June 30, 2016 

 Six Months Ended
June 30, 2016 

Income
before
income
taxes

Provision
for income
taxes

Effective
income tax
rate

Income
before
income
taxes

Provision f
or income
taxes

Effective
income tax
rate

Income before income taxes, as reported

$ 1,129.8

$     402.7

$ 1,940.8

$     681.5

Net income attributable to non-controlling interest

(6.4)

-

(12.5)

-

Income before income taxes attributable to Express Scripts

1,123.4

402.7

35.8%

1,928.3

681.5

35.3%

Excluding items indicated: 

Debt redemption costs ⁽⁸⁾

-

-

9.7

3.6

Discrete tax items⁽⁷⁾

-

13.8

-

33.5

Amortization of intangible assets⁽⁶⁾

463.7

171.9

907.0

336.3

Income before income taxes attributable to Express Scripts, as adjusted

$ 1,587.1

$     588.4

37.1%

$ 2,845.0

$  1,054.9

37.1%

Adjusted net income attributable to Express Scripts

$    998.7

$ 1,790.1

 See Footnotes to Press Release 

 Table 6 

 Express Scripts Holding Company Unaudited 2017 Guidance Information 

Adjusted diluted EPS and EBITDA are non-GAAP financial measures.  For a discussion of the financial measures presented herein that are not calculated or presented in accordance with GAAP, see "Supplemental Information Regarding Non-GAAP Financial Measures" above.

                     Estimated
                  Year Ending
             December 31, 2017 

                     Estimated
                  Year Ending
             December 31, 2017 

  (in millions, except per share data) 

 Current Guidance 

 Previous Guidance 

Adjusted Diluted EPS attributable to Express Scripts

$6.95 to $7.05

$6.90 to $7.04

Year over year growth 

9%-10%

8%-10%

Total adjusted claims

1,385 to 1,415

1,375 to 1,425

EBITDA attributable to Express Scripts

$7,330 to $7,490

$7,310 to $7,510

Diluted weighted average shares outstanding during the period

580 to 590

575 to 595

Net cash flow provided by operating activities

$4,700 to $5,200

$4,700 to $5,200

 Estimated
 Three Months Ending
 September 30, 2017 

  (in millions, except per share data) 

 Current Guidance 

Adjusted Diluted EPS attributable to Express Scripts

$1.88 to $1.92

Year over year growth 

8%-10%

Total adjusted claims

340 to 350

 Table 7 

 Express Scripts Holding Company Operating Results Excluding Estimate of Contribution related to Anthem and Transitioning Clients 

 (amounts in millions except per claim figures) 

 (Three months ended) 

 Q2 2017 

 Q2 2016 

 Q2 2017 Change 

Consolidated
As Reported
Q2 2017

Anthem⁽¹⁾

Transitioning
Clients⁽¹⁾

Excluding
Anthem &
Transitioning
Clients⁽¹⁾

Consolidated
As Reported
Q2 2016

Anthem⁽¹⁾
(Table 8)

Transitioning
Clients⁽¹⁾
(Table 8)

Excluding
Anthem &
Transitioning
Clients⁽¹⁾

As Reported

Excluding
Anthem &
Transitioning
Clients⁽¹⁾

Adjusted claims

 Table 1 

350.0

58.4

0.7

290.9

349.3

54.2

4.9

290.2

0.2%

0.2%

Revenues⁽²⁾

$  25,347.5

$ 4,739.1

$        148.4

$   20,460.0

$  25,222.3

$ 4,354.9

$        471.9

$   20,395.5

0.5%

0.3%

Net income

$       801.8

 N/A 

 N/A 

 N/A 

$       720.7

 N/A 

 N/A 

 N/A 

11.3%

 N/A 

EBITDA⁽³⁾

 Table 3 

$    1,824.1

$    609.1

$          44.4

$     1,170.6

$    1,798.1

$    644.7

$          49.5

$     1,103.9

1.4%

6.0%

EBITDA/adjusted claim⁽³⁾

 Table 3 

$         5.21

$    10.43

 N/A 

$          4.02

$         5.15

$    11.89

 N/A 

$          3.80

1.2%

5.8%

 (Six months ended) 

 Q2 2017 

 Q2 2016 

 Q2 2017 Change 

Consolidated
As Reported
Q2 2017

Anthem⁽¹⁾

Transitioning
Clients⁽¹⁾

Excluding
Anthem &
Transitioning
Clients⁽¹⁾

Consolidated
As Reported
Q2 2016

Anthem⁽¹⁾
(Table 8)

Transitioning
Clients⁽¹⁾
(Table 8)

Excluding
Anthem &
Transitioning
Clients⁽¹⁾

As Reported

Excluding
Anthem &
Transitioning
Clients⁽¹⁾

Adjusted claims

 Table 1 

701.7

117.4

1.6

582.7

705.6

108.7

10.5

586.4

-0.6%

-0.6%

Revenues⁽²⁾

$  50,002.4

$ 9,262.1

$        361.4

$   40,378.9

$  50,014.1

$ 8,451.6

$        929.4

$   40,633.1

0.0%

-0.6%

Net income

$    1,348.1

 N/A 

 N/A 

 N/A 

$    1,246.8

 N/A 

 N/A 

 N/A 

8.1%

 N/A 

EBITDA⁽³⁾

 Table 3 

$    3,320.3

$ 1,104.1

$          98.5

$     2,117.7

$    3,258.1

$ 1,112.6

$          99.5

$     2,046.0

1.9%

3.5%

EBITDA/adjusted claim⁽³⁾

 Table 3 

$         4.73

$      9.40

 N/A 

$          3.63

$         4.62

$    10.24

 N/A 

$          3.49

2.4%

4.0%

See Footnotes to Press Release.

 Table 8 

 Express Scripts Holding Company - Estimate of Anthem and
Transitioning Clients Contribution by Quarter 

 (amounts in millions except per claim figures) 

Anthem^(1),(3)

 Q1 2016 

 Q2 2016 

 Q3 2016 

 Q4 2016 

Adjusted Claims

54.5

54.2

54.3

56.6

Revenues⁽²⁾

$   4,096.7

$   4,354.9

$   4,243.0

$   4,381.3

Adjusted EBITDA*

$      467.9

$      644.7

$      572.1

$      563.3

Adjusted EBITDA/adjusted claim*

$        8.59

$      11.89

$      10.54

$        9.95

Transitioning Clients^(1),(3)

 Q1 2016 

 Q2 2016 

 Q3 2016 

 Q4 2016 

Adjusted Claims

5.6

4.9

4.6

3.9

Revenues

$      457.5

$      471.9

$      411.5

$      356.0

Adjusted EBITDA*

$        50.0

$        49.5

$        49.3

$        73.6

Combined Contribution^(1),(3)

 Q1 2016 

 Q2 2016 

 Q3 2016 

 Q4 2016 

Adjusted Claims

60.1

59.1

58.9

60.5

Revenues⁽²⁾

$   4,554.2

$   4,826.8

$   4,654.5

$   4,737.3

Adjusted EBITDA*

$      517.9

$      694.2

$      621.4

$      636.9

Core PBM (Excluding Anthem and Transitioning Clients)^(1),(3)

 Q1 2016 

 Q2 2016 

 Q3 2016 

 Q4 2016 

Adjusted Claims

296.2

290.2

288.2

294.4

Revenues

$ 20,237.6

$ 20,395.5

$ 20,755.6

$ 20,126.0

Adjusted EBITDA*

$      942.1

$   1,103.9

$   1,326.7

$   1,417.3

Adjusted EBITDA/adjusted claim*

$        3.18

$        3.80

$        4.60

$        4.81

(*) Adjusted EBITDA with respect  to Q1, Q2 and Q3 2016 is equal to "EBITDA" as no adjustments to EBITDA were made for these periods and Q4 included an adjustment for other compensation costs of $41.2 million and is equal to "Adjusted EBITDA."

See Footnotes to Press Release

 Footnotes to Press Release 

(1)  Amounts attributable to Anthem and each of the Transitioning Clients are based on management's estimates regarding, among other items, cost allocation and may not be indicative of costs actually incurred as a result of servicing Anthem and each of the Transitioning Clients. Both direct and indirect costs were allocated based on management's best estimates of costs attributable to servicing Anthem and each of the Transitioning Clients, and, where appropriate, are based on actual cost or adjusted claims attributable to Anthem and each of the Transitioning Clients.  

(2)  Consolidated revenues and Anthem revenues include intangible amortization related to the customer contract with Anthem of $55.4 million for the three months ended June 30, 2017 and 2016, respectively.  Consolidated revenues and Anthem revenues include intangible amortization related to the customer contract with Anthem of $110.8 million and $89.7 million for the six months ended June 30, 2017 and 2016, respectively.   

(3)  EBITDA, Adjusted EBITDA, EBITDA per adjusted claim and adjusted EBITDA per adjusted claim are non-GAAP financial measures. For a discussion of the financial measures presented herein that are not calculated or presented in accordance with U.S. generally accepted accounting principles ("GAAP"), see "Supplemental Information Regarding Non-GAAP Financial Measures" above.

(4)  Includes home delivery, specialty and other including:  (i) drugs distributed through patient assistance programs, (ii) drugs distributed to clients of other PBMs under limited distribution contracts with pharmaceutical manufacturers and (iii) Freedom Fertility claims. 

(5)  Total adjusted network claims 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.  Home delivery claims are also multiplied by three, consistent with prior practice, as home delivery claims typically cover a time period three times longer than unadjusted network claims.  See Footnotes to Press Release - Schedule A below.

(6) Amortization of intangible assets includes the following items:

Amortization of legacy Express Scripts, Inc. ("ESI") intangible assets include amounts in both revenues and selling, general and administrative expense.

Revenue amortization is related to the customer contract with Anthem, which commenced upon closing of the NextRx acquisition in 2009.  Amortization of intangibles that arises in connection with consideration given to a customer by a vendor is characterized as a reduction of revenues.  Intangible amortization of $55.4 million ($35.1 million net of tax) and $55.4 million ($34.8 million net of tax) is included as a reduction to revenue for the three months ended June 30, 2017 and 2016, respectively.  Intangible amortization of $110.8 million ($70.1 million net of tax) and $89.7 million ($56.4 million net of tax) is included as a reduction to revenue for the six months ended June 30, 2017 and 2016, respectively.  The Company's 10-year agreement with Anthem under which we provide pharmacy benefit management services to Anthem and its designated affiliates was previously amortized using a modified pattern of benefit method over an estimated useful life of 15 years.  Beginning in March 2016, we began amortizing our agreement with Anthem over the remaining term of the contract (i.e., using a modified pattern of benefit over an estimated useful life of 10 years from the time the agreement was executed in 2009), which resulted in an additional $31.7 million of revenue amortization recognized for both the three months ended June 30, 2017 and 2016, respectively, and an additional $63.4 million and $42.2 million of revenue amortization recognized for the six months ended June 30, 2017 and 2016, respectively.  

Other legacy ESI intangible amortization of $21.1 million ($13.3 million net of tax) and $9.5 million ($6.0 million net of tax) for the three months ended June 30, 2017 and 2016, respectively, is included in selling, general and administrative expense.  Other legacy ESI intangible amortization of $29.0 million ($18.3 million net of tax) and $18.9 million ($11.9 million net of tax) for the six months ended June 30, 2017 and 2016, respectively, is included in selling, general and administrative expense. 

Amortization of intangible assets related to the acquisition of Medco of $287.6 million ($181.6 million net of tax) and $398.8 million ($251.0 million net of tax) for the three months ended June 30, 2017 and 2016, respectively, is included in selling, general and administrative expense.  Amortization of intangible assets related to the acquisition of Medco of $586.7 million ($370.8 million net of tax) and $798.4 million ($502.4 million net of tax) for the six months ended June 30, 2017 and 2016, respectively, is included in selling, general and administrative expense.  

(7) Provision for income taxes includes discrete tax benefits of $20.2 million and  $13.8 million for the three months ended June 30, 2017 and 2016, respectively, and includes discrete tax charges of $9.7 million and discrete tax benefits of $33.5 million for the six months ended June 30, 2017 and 2016, respectively.  The 2017 net discrete tax items relate primarily to a revaluation of net deferred tax attributes.  The 2016 net discrete tax items relate primarily to changes in unrecognized tax benefits. 

(8) Debt redemption costs, which include write-off of discounts, write-off of deferred financing costs and interest accrued from February 25, 2016 to the redemption date incurred for the early redemption of senior notes, totaled $9.7 million ($6.1 million net of tax) and are included in interest expense for the six months ended June 30, 2016. 

(9)  Represents adjustment for the tax impact related to non-GAAP items excluded from adjusted diluted EPS.  See Table 5 and 5A for calculation of adjusted effective income tax rate.  

 Footnotes to Press Release:  Schedule A 

 Express Scripts Holding Company Unaudited 2016 and 2015 Claims Recast 

As previously reported in our February 14, 2017 press release and explained in footnote (5), we changed our methodology for calculating network claims retrospectively for 2016 and 2015.  Provided below are recasts of the revised methodology for reporting network claims.

 (in millions) 

As reported
Q1 2016

Revision

Revised Q1
2016

As reported
Q2 2016

Revision

Revised
Q2 2016

As reported
Q3 2016

Revision

Revised Q3
2016

Claims Volume

Network

226.1

-

226.1

221.2

-

221.2

217.0

-

217.0

Home delivery and specialty⁽⁴⁾

30.3

-

30.3

29.5

-

29.5

30.0

-

30.0

   Total claims 

256.4

-

256.4

250.7

-

250.7

247.0

-

247.0

Adjusted network⁽⁵⁾

234.7

32.8

267.5

229.4

34.0

263.4

224.5

34.9

259.4

Adjusted home delivery and specialty⁽⁵⁾

88.8

-

88.8

85.9

-

85.9

87.7

-

87.7

   Total adjusted claims⁽⁵⁾

323.5

32.8

356.3

315.3

34.0

349.3

312.2

34.9

347.1

As reported
Q1 2015

Revision

Revised
Q1 2015

As reported
Q2 2015

Revision

Revised
Q2 2015

As reported
Q3 2015

Revision

Revised Q3
2015

Claims Volume

Network

219.1

-

219.1

228.2

-

228.2

232.8

-

232.8

Home delivery and specialty⁽⁴⁾

30.2

-

30.2

30.2

-

30.2

30.0

-

30.0

   Total claims 

249.3

-

249.3

258.4

-

258.4

262.8

-

262.8

Adjusted network⁽⁵⁾

219.1

33.0

252.1

232.9

35.6

268.5

240.8

36.9

277.7

Adjusted home delivery and specialty⁽⁵⁾

88.5

-

88.5

88.3

-

88.3

87.5

-

87.5

   Total adjusted claims⁽⁵⁾

307.6

33.0

340.6

321.2

35.6

356.8

328.3

36.9

365.2