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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Express Scripts Holding Co., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net operating profit after taxes (NOPAT)¹	3,274,103)	3,375,341)	2,290,431)	1,953,528)	1,817,712)
Cost of capital²	9.95%	9.90%	9.97%	10.82%	10.70%
Invested capital³	37,007,152)	35,712,343)	37,411,086)	38,622,209)	41,289,230)

Economic profit⁴	(409,069)	(160,564)	(1,437,682)	(2,227,155)	(2,600,826)

Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2017 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,274,103 – 9.95% × 37,007,152 = -409,069

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Express Scripts Holding Co. economic profit increased from 2015 to 2016 but then slightly decreased from 2016 to 2017.

Express Scripts Holding Co., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net income attributable to Express Scripts	4,517,400)	3,404,400)	2,476,400)	2,007,600)	1,844,600)
Deferred income tax expense (benefit)¹	(1,678,900)	(497,400)	(462,100)	(430,500)	(573,700)
Increase (decrease) in allowance for doubtful accounts²	20,300)	(12,300)	(77,800)	(37,100)	69,700)
Increase (decrease) in equity equivalents³	(1,658,600)	(509,700)	(539,900)	(467,600)	(504,000)
Interest expense and other	607,900)	694,800)	500,300)	582,900)	596,100)
Interest expense, operating lease liability⁴	9,028)	8,956)	8,671)	11,144)	12,226)
Adjusted interest expense and other	616,928)	703,756)	508,971)	594,044)	608,326)
Tax benefit of interest expense and other⁵	(215,925)	(246,314)	(178,140)	(207,915)	(212,914)
Adjusted interest expense and other, after taxes⁶	401,003)	457,441)	330,831)	386,128)	395,412)
(Income) loss from discontinued operations, net of tax⁷	—)	—)	—)	—)	53,600)
Net income (loss) attributable to noncontrolling interest	14,300)	23,200)	23,100)	27,400)	28,100)
Net operating profit after taxes (NOPAT)	3,274,103)	3,375,341)	2,290,431)	1,953,528)	1,817,712)

Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in equity equivalents to net income attributable to Express Scripts.

⁴ 2017 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 236,952 × 3.81% = 9,028

⁵ 2017 Calculation
Tax benefit of interest expense and other = Adjusted interest expense and other × Statutory income tax rate
= 616,928 × 35.00% = 215,925

⁶ Addition of after taxes interest expense to net income attributable to Express Scripts.

⁷ Elimination of discontinued operations.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Express Scripts Holding Co. NOPAT increased from 2015 to 2016 but then slightly decreased from 2016 to 2017.

Express Scripts Holding Co., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Provision for income taxes	397,300)	999,500)	1,364,300)	1,031,200)	1,104,000)
Less: Deferred income tax expense (benefit)	(1,678,900)	(497,400)	(462,100)	(430,500)	(573,700)
Add: Tax savings from interest expense and other	215,925)	246,314)	178,140)	207,915)	212,914)
Cash operating taxes	2,292,125)	1,743,214)	2,004,540)	1,669,615)	1,890,614)

Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Express Scripts Holding Co. cash operating taxes decreased from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Express Scripts Holding Co., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Short-term debt and current maturities of long-term debt	1,032,900)	722,300)	1,646,400)	2,555,300)	1,584,000)
Long-term debt, excluding current maturities	14,981,500)	14,846,000)	13,946,300)	11,012,700)	12,363,000)
Operating lease liability¹	236,952)	240,743)	266,786)	294,809)	321,730)
Total reported debt & leases	16,251,352)	15,809,043)	15,859,486)	13,862,809)	14,268,730)
Total Express Scripts stockholders’ equity	18,119,600)	16,236,000)	17,372,800)	20,054,200)	21,837,400)
Net deferred tax (assets) liabilities²	2,532,300)	3,572,200)	4,069,800)	4,532,400)	4,985,200)
Allowance for doubtful accounts³	95,300)	75,000)	87,300)	165,100)	202,200)
Equity equivalents⁴	2,627,600)	3,647,200)	4,157,100)	4,697,500)	5,187,400)
Accumulated other comprehensive (income) loss, net of tax⁵	2,900)	12,300)	14,000)	(2,100)	(11,700)
Non-controlling interest	5,700)	7,800)	7,700)	9,800)	7,400)
Adjusted total Express Scripts stockholders’ equity	20,755,800)	19,903,300)	21,551,600)	24,759,400)	27,020,500)
Invested capital	37,007,152)	35,712,343)	37,411,086)	38,622,209)	41,289,230)

Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to total Express Scripts stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Express Scripts Holding Co. invested capital decreased from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.

Express Scripts Holding Co., cost of capital calculations

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,380,248)	44,380,248)	÷	60,978,400)	=	0.73	0.73	×	12.75%	=	9.28%
Debt³	16,361,200)	16,361,200)	÷	60,978,400)	=	0.27	0.27	×	3.81% × (1 – 35.00%)	=	0.66%
Operating lease liability⁴	236,952)	236,952)	÷	60,978,400)	=	0.00	0.00	×	3.81% × (1 – 35.00%)	=	0.01%
Total:	60,978,400)					1.00					9.95%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,176,284)	42,176,284)	÷	58,225,826)	=	0.72	0.72	×	12.75%	=	9.23%
Debt³	15,808,800)	15,808,800)	÷	58,225,826)	=	0.27	0.27	×	3.72% × (1 – 35.00%)	=	0.66%
Operating lease liability⁴	240,743)	240,743)	÷	58,225,826)	=	0.00	0.00	×	3.72% × (1 – 35.00%)	=	0.01%
Total:	58,225,826)					1.00					9.90%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	45,861,358)	45,861,358)	÷	62,116,744)	=	0.74	0.74	×	12.75%	=	9.41%
Debt³	15,988,600)	15,988,600)	÷	62,116,744)	=	0.26	0.26	×	3.25% × (1 – 35.00%)	=	0.54%
Operating lease liability⁴	266,786)	266,786)	÷	62,116,744)	=	0.00	0.00	×	3.25% × (1 – 35.00%)	=	0.01%
Total:	62,116,744)					1.00					9.97%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	63,036,595)	63,036,595)	÷	77,531,603)	=	0.81	0.81	×	12.75%	=	10.37%
Debt³	14,200,200)	14,200,200)	÷	77,531,603)	=	0.18	0.18	×	3.78% × (1 – 35.00%)	=	0.45%
Operating lease liability⁴	294,809)	294,809)	÷	77,531,603)	=	0.00	0.00	×	3.78% × (1 – 35.00%)	=	0.01%
Total:	77,531,603)					1.00					10.82%

Based on: 10-K (reporting date: 2014-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2013

	Capital (fair value)¹	Weights					Cost of capital
Equity²	59,847,588)	59,847,588)	÷	74,732,117)	=	0.80	0.80	×	12.75%	=	10.21%
Debt³	14,562,800)	14,562,800)	÷	74,732,117)	=	0.19	0.19	×	3.80% × (1 – 35.00%)	=	0.48%
Operating lease liability⁴	321,730)	321,730)	÷	74,732,117)	=	0.00	0.00	×	3.80% × (1 – 35.00%)	=	0.01%
Total:	74,732,117)					1.00					10.70%

Based on: 10-K (reporting date: 2013-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Express Scripts Holding Co., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (US$ in thousands)
Economic profit¹	(409,069)	(160,564)	(1,437,682)	(2,227,155)	(2,600,826)
Invested capital²	37,007,152)	35,712,343)	37,411,086)	38,622,209)	41,289,230)
Performance Ratio
Economic spread ratio³	-1.11%	-0.45%	-3.84%	-5.77%	-6.30%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	—	—	—	—	—
Cigna Group	—	—	—	—	—
CVS Health Corp.	—	—	—	—	—
Danaher Corp.	—	—	—	—	—
Elevance Health Inc.	—	—	—	—	—
Humana Inc.	—	—	—	—	—
Intuitive Surgical Inc.	—	—	—	—	—
Medtronic PLC	—	—	—	—	—
UnitedHealth Group Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -409,069 ÷ 37,007,152 = -1.11%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Express Scripts Holding Co. economic spread ratio improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Express Scripts Holding Co., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (US$ in thousands)
Economic profit¹	(409,069)	(160,564)	(1,437,682)	(2,227,155)	(2,600,826)
Revenues	100,064,600)	100,287,500)	101,751,800)	100,887,100)	104,098,800)
Performance Ratio
Economic profit margin²	-0.41%	-0.16%	-1.41%	-2.21%	-2.50%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	—	—	—	—	—
Cigna Group	—	—	—	—	—
CVS Health Corp.	—	—	—	—	—
Danaher Corp.	—	—	—	—	—
Elevance Health Inc.	—	—	—	—	—
Humana Inc.	—	—	—	—	—
Intuitive Surgical Inc.	—	—	—	—	—
Medtronic PLC	—	—	—	—	—
UnitedHealth Group Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).

¹ Economic profit. See details »

² 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -409,069 ÷ 100,064,600 = -0.41%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Express Scripts Holding Co. economic profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Express Scripts Holding Co. (NASDAQ:ESRX)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin