During this call, we'll discuss some non-GAAP financial measures in talking about our company's performance, namely, free cash flow, EBITDA and adjusted EPS. In accordance with SEC regulations, you can find the definitions of the non-GAAP items I mentioned as well as the reconciliations to comparable GAAP measures on the Investor Relations portion of our website.And we also encourage you to download the slide presentation we posted on our website this morning. The slides summarize the information on this call as well as key facts and figures around our operating performance and guidance. As always, today's call is being simulcast on our website, and it will be archived there following the call for one year. Finally, please note that we filed our Form 10-Q this morning and is available through our website. Now before we begin, our attorneys have asked me to read the Safe Harbor statement. During this presentation, we'll make certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Accordingly, for these forward-looking statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We strongly recommend that you become familiar with the specific risks and uncertainties that are described in the Risk Factors section of our most recently filed annual report on Form 10-K and that you review the section entitled Cautionary Statement Concerning Forward-Looking Statements in our most recently filed quarterly report on Form 10-Q. And now, I'll turn this over to Larry Merlo. Larry J. Merlo Well, thanks, Nancy, and good morning, everyone. Thanks for joining us today. Well, we're certainly very pleased with the results we posted this morning. We reported adjusted earnings per share from continuing operations of $0.65 for the first quarter with both Retail and PBM results coming in at the high end of our expectations and EPS exceeding the high end of our guidance by $0.02. And while our operating results came in at the high end of our expectations, the EPS beat was driven by financial-related items including the change in inventory accounting methods, interest in lower shares outstanding resulting from our successful capital allocation program, all of which Dave will cover more fully in this update. But overall, this was a terrific quarter with strong results across-the-board including our cash generation.
In the first quarter, we achieved the expected $0.03 per share benefit from the impasse between Walgreens and Express Scripts. For the second quarter, we are projecting a $0.03 to $0.04 EPS benefit from the impasse assuming the situation remains unresolved for the duration of the quarter. The benefit is expected to be slightly higher than the first quarter, primarily driven by greater operating efficiency in our pharmacies and we'll also see a full quarter's run rate of ESI script volumes that transferred throughout the first quarter, as well as a modest ramp in the front store benefit from these new customers.As a result of our strong first quarter results, as well as the inclusion of the Walgreens-Express benefit in the second quarter, we are raising our guidance for the full year. We now expect to achieve adjusted earnings per share for 2012 in the range of $3.23 to $3.33 with both ends of the range up $0.05 from our February guidance and up $0.08 from our initial guidance, which we provided at our December Analyst Day. And please remember that we are taking the Walgreens Express benefit one quarter at a time. We're not projecting benefits to quarters beyond the current one. So we would encourage you to only include the benefit in your models through the second quarter. We will report the estimated impact from this impasse to you, again, on a quarter-by-quarter basis throughout the year if it remains unresolved. And as I said, Dave will provide the details of our results as well as guidance for the second quarter and full year during his financial review. Now let me turn to a brief business update, and I'll begin with our PBM. As you know, we had a terrific 2012 selling season, winning $7.1 billion in net new business on top of another $5.5 billion in incremental revenues from the Universal American contracts we picked up this year. So we expect to add $12.6 billion in net new revenues in 2012 with a 98% retention rate. And while it's still early in the '13 selling season, we're optimistic about the opportunities and continue to feel very good about our unique position in the marketplace. We are bullish about the receptivity to our model along with our proprietary programs. Now there's obviously a lot of change in the marketplace related to the Walgreens-Express impasse as well as recent significant PBM consolidation activity. But the market continues to be competitive, yet rational, and with our stable business and unmatched breadth of capabilities, we believe we are very well positioned for success now and in the future.
So let me touch on renewals. To date, about 1/4 of our scheduled renewals have gone through the renewal process, which is pretty typical for this time of year. And while we've previously said we had approximately $16 billion up for renewal in '13, the number dropped to about $14.5 billion, largely due to the Health Net Med D PDP acquisition. And since we acquired the business, we're no longer including that contract in our renewal number. So given that it's still early in the season, we have about 3 quarters or $11 billion left to go through the renewal process, and we'll have a lot more to say about renewals as well as new business as we get further along in the selling season.Read the rest of this transcript for free on seekingalpha.com