Financial Astrology of Medco Health Solutions, Inc.

FINANCIAL ASTROLOGY

First Trade Date for Medco Health Solutions, Inc.

Company Name	First Trade Date (yyyy-mm-dd)
Medco Health Solutions, Inc.	2003-08-20

Company Name	Symbol
Medco Health Solutions, Inc.	MHS
History and Business of Company (this information may include date of incorporation)
Medco Health Solutions, Inc. ("Medco Health" or the "Company") provides pharmacy benefit management ("PBM") services and programs for its clients and the members of their pharmacy benefit plans, as well as for the physicians and pharmacies the members use. The Company's programs and services help its clients moderate the cost and enhance the quality of the prescription drug benefits they offer to their members. The Company accomplishes this primarily by negotiating competitive rebates and discounts from pharmaceutical manufacturers, obtaining competitive discounts from retail pharmacies and administering prescriptions filled through its national networks of retail pharmacies or its own home delivery pharmacies. The Company was previously a wholly owned subsidiary of Merck & Co., Inc. ("Merck"). On August 5, 2003, Merck announced that it had declared a special dividend of all the outstanding shares of common stock of Medco Health. The declaration and payment of the special dividend was contingent upon Medco Health's registration statements on Form 10 and Form S-1 being declared effective by the U.S. Securities and Exchange Commission (the "Commission") and Medco Health's payment to Merck of cash dividends in an aggregate amount of $2.0 billion. On August 7, 2003, the Commission declared the Form 10 effective. The Commission also declared effective Medco Health's registration statement on Form S-1 relating to Medco Health's $500 million senior notes offering. Merck received a ruling from the Internal Revenue Service concluding that the distribution by Merck of Medco Health stock to its U.S. stockholders was tax-free for federal income tax purposes. On August 19, 2003, Merck stockholders of record as of August 12, 2003 received 0.1206 shares of Medco Health common stock for every one share of Merck common stock held (the "distribution"). In conjunction with the distribution, on August 8, 2003, the Company received $564.7 million in settlement of the recorded amount of the net intercompany receivable due from Merck arising from intercompany transactions from December 31, 2001 to July 31, 2003. On August 12, 2003, Medco Health completed an underwritten public offering of $500 million aggregate principal amount of ten-year senior notes at a price to the public of 99.195 percent of par value. The senior notes bear interest at a rate of 7.25 percent per annum and mature on August 15, 2013. In addition, Medco Health borrowed $900 million in term loans under a $1,150 million senior secured credit facility and has drawn down $100 million under a $500 million accounts receivable financing facility. The proceeds from these borrowings, the senior notes offering and the amount received through the settlement of the net intercompany receivable from Merck were used to pay the $2.0 billion in cash dividends to Merck. The Company began recording retained earnings for the period subsequent to May 25, 2002 when it converted from a limited liability company to a corporation. Of the $2.0 billion in cash dividends paid to Merck, $500.4 million, representing the accumulated retained earnings from May 25, 2002 through August 19, 2003, was applied to retained earnings and the balance of $1,499.6 million was applied to additional paid-in capital. In connection with the distribution, Merck and the Company entered into a series of agreements, such as a master separation and distribution agreement, an indemnification and insurance matters agreement, an amended and restated managed care agreement, a tax responsibility allocation agreement and other related agreements, which govern the ongoing relationship between the two companies. The consolidated financial statements reflect the historical results of operations and cash flows of the Company and include the goodwill and intangible assets pushed down to the Company's balance sheet arising from Merck's acquisition of the Company on November 18, 1993. For the majority of the period from November 18, 1993 through August 19, 2003 during which the Company was a wholly owned subsidiary of Merck, Merck provided the Company with various services, including finance, legal, public affairs, executive oversight, human resources, procurement and other services. The historical financial statements include expense allocations related to these services, which diminished as the Company prepared for its separation from Merck. The Company considers these allocations to be reasonable reflections of the utilization of services provided, and has assumed full responsibility for these services and the related expenses. See Note 8 for additional information on the relationship with Merck. The financial information included herein is not indicative of the consolidated financial position, operating results, changes in equity and cash flows of the Company for any future period, or what they would have been had the Company operated as a separate company prior to August 19, 2003.

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