EBITDA increased 11.8 percent to a record $2.8 billion compared to 2008.  Even with the strong retail volumes from 2009 new business wins, EBITDA per adjusted prescription decreased only 1.0 percent to $3.06, compared to $3.09 in 2008.  (Please refer to Table 6 for a reconciliation of EBITDA to reported net income).

Total interest and other (income) expense, net, of $162.6 million decreased from 2008 by 28.5 percent, or $64.9 million, largely attributable to lower interest rates on debt, reduced debt levels and higher cash balances.

Record income before the provision for income taxes of $2.1 billion increased 17.5 percent from $1.8 billion in 2008.

Record net income of $1.3 billion increased 16.1 percent from $1.1 billion in 2008.  Additionally, the full-year 2009 effective tax rate was 39.1 percent, compared to 38.4 percent in 2008.

Medco generated record cash flows from operations of $3.5 billion, compared to $1.6 billion in 2008, and closed the year with over $2.5 billion of cash on its balance sheet, up from $0.9 billion at year-end 2008.

"Our strong balance sheet, record cash flow from operations, and greater than expected return on invested capital of 27.1 percent, compared to 20.1 percent in 2008, are the result of a disciplined financial strategy focused on setting the stage for future growth," said Richard J. Rubino, chief financial officer.  "We are committed to deploying capital in a manner that we believe will fuel long-term shareholder returns.  We will continue to invest internally to further propel our differentiated model to deliver services in support of Making Medicine Smarter, and actively seek opportunities to drive future growth both inside and outside of the United States.  Additionally, we expect to continue repurchasing shares under our $3 billion share repurchase program."

Specialty Pharmacy

For fourth-quarter 2009, Accredo's net revenues increased 17.7 percent to a record of $2.5 billion.  For full-year 2009, revenues for Accredo grew 19.5 percent to a record of $9.5 billion, compared to $8.0 billion in 2008.  This is primarily the result of the contribution from significant new client wins and continued growth across the specialty business.

Accredo's fourth-quarter 2009 gross margin was 7.0 percent, down 90 basis points from 7.9 percent in the fourth quarter of 2008.  Full-year 2009 gross margin was 7.4 percent, down 50 basis points from 7.9 percent in 2008.  The gross margin percentages reflect new client wins resulting in a higher retail channel mix.

Accredo's operating income for fourth-quarter 2009 grew 17.1 percent to $84.1 million.  For the full year, operating income increased 27.0 percent to a record $357.1 million from $281.2 million in 2008, reflecting strong business growth and continued operational efficiencies.

Share Repurchase Program

As part of its $3 billion share repurchase program, Medco repurchased 3.7 million shares during fourth-quarter 2009 at a total cost of $231 million with an average per-share cost of $62.36.  For full-year 2009, Medco repurchased 27.3 million shares at a total cost of $1.24 billion with an average per-share cost of $45.38.  Since the inception of the current $3.0 billion share repurchase program in November 2008, Medco has repurchased 32.4 million shares for a total cost of $1.44 billion with an average per-share cost of $44.34 through year-end 2009. 

For 2010 to-date, as of Friday, February 19, 2010, Medco repurchased 12.8 million shares at a total cost of $804 million with an average per-share cost of $62.94 and has approximately $758 million remaining under the current share repurchase program.

2010 Guidance Reaffirmed

For full-year 2010, Medco expects to achieve GAAP diluted EPS in the range of $3.05 to $3.15, representing growth of 17 to 21 percent over 2009 results.  Diluted EPS in 2010 excluding amortization of intangible assets from the 2003 spin-off, of $3.28 to $3.38, represents 16 to 19 percent growth over 2009 results.

"We remain confident in the power of our business model to drive meaningful value for our clients and members, and we continue to expect strong earnings growth in 2010," said Rubino.  

SOURCE Medco Health Solutions, Inc.