CVS Caremark Reports Record Results in Fourth Quarter and Fiscal 2009
Fourth Quarter Year-Over-Year Highlights:
- Adjusted EPS from continuing operations of $0.79 (including a $0.01 income tax benefit), up 13.6%
- GAAP diluted EPS from continuing operations of $0.74 (including a $0.01 income tax benefit), up 14.6%
- Net revenues of $25.8 billion, up 7.0%
- PBM revenues increased 14.5%, with pharmacy network revenues up 19.1% and mail choice revenues up 6.3%
- Retail revenues increased 4.5%, with same store sales up 4.9%
- Fourth quarter of 2009 includes three fewer reporting days compared to the fourth quarter of 2008
WOONSOCKET, R.I., Feb. 8 /PRNewswire-FirstCall/ -- CVS Caremark Corporation (NYSE: CVS) today announced record revenues, operating profit, and income from continuing operations for the fourth quarter and fiscal year ended December 31, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20090226/NE75914LOGO)
Revenues
Net revenues for the fourth quarter of 2009, increased $1.7 billion to $25.8 billion, up from $24.1 billion in the fourth quarter of 2008. For fiscal year 2009, total revenue increased 12.9% to a record $98.7 billion, compared to $87.5 billion in fiscal year 2008.
Revenues in the pharmacy services segment increased 14.5% to $13.5 billion in the fourth quarter of 2009. Adjusting the growth rate for the impact of new generics, net revenues would have grown 18.3% in the pharmacy services segment. Pharmacy network claims processed during the fourth quarter of 2009 decreased 5.6% to 151.4 million, compared to 160.3 million in the fourth quarter of 2008. This decrease was primarily due to the termination of two large health plan clients effective January 1, 2009 and having three fewer reporting days in the fourth quarter of 2009 compared to the fourth quarter of 2008. This was partially offset by new client starts and the addition of RxAmerica claims for the full fourth quarter of 2009 as compared to a partial quarter in 2008. Mail choice claims processed during the fourth quarter of 2009 increased 4.4% to 16.7 million compared to 16.0 million in the fourth quarter of 2008 primarily as a result of net new client starts. For fiscal year 2009, total revenue in the pharmacy services segment increased 16.7% to $51.1 billion, compared to $43.8 billion in fiscal year 2008.
Revenues in the retail pharmacy segment increased 4.5% to $14.5 billion in the fourth quarter of 2009. Same store sales (sales from stores open more than one year) increased 4.9% in the fourth quarter of 2009. The growth rate of revenues in the retail pharmacy segment is lower than the growth rate of same store sales due to three fewer reporting days in the fourth quarter of 2009, as compared to the fourth quarter of 2008. Pharmacy same store sales rose 7.3% in the fourth quarter of 2009 and were negatively impacted by approximately 290 basis points due to recent generic introductions. Pharmacy same store sales in the fourth quarter of 2009 were positively impacted by approximately 270 basis points due to Maintenance Choice™. Front store same store sales increased 0.3% in the fourth quarter of 2009. For fiscal year 2009, total revenue in the retail pharmacy segment increased 13.0% to $55.4 billion, compared to $49.0 billion in fiscal year 2008.
The generic dispensing rate in our pharmacy services segment increased approximately 220 basis points to 68.9% and by approximately 260 basis points to 70.6% in our retail segment for the fourth quarter of 2009, compared to the fourth quarter of 2008.
Income from Continuing Operations
Income from continuing operations for the fourth quarter of 2009, increased 10.2% to $1.1 billion, compared to $1.0 billion during the fourth quarter of 2008. Adjusted earnings per share from continuing operations, which excludes $108 million of intangible asset amortization related to acquisition activity, for the fourth quarter of 2009 were $0.79 (including the $0.01 per diluted share income tax benefit), compared to $0.70 in the fourth quarter of 2008. GAAP earnings per diluted share from continuing operations for the fourth quarter of 2009 were $0.74 (including the $0.01 per diluted share income tax benefit), compared to $0.65 in the fourth quarter of 2008.
During the fiscal year ended December 31, 2009, the Company recorded approximately $167 million, or $0.12 per diluted share, of previously unrecognized tax benefits.
Income from continuing operations for the fiscal year ended December 31, 2009, increased 10.9% to $3.7 billion, compared to $3.3 billion in fiscal year 2008. Adjusted earnings per share from continuing operations, which excludes $430 million of intangible asset amortization related to acquisition activity, for 2009 were $2.74 (including the $0.12 per diluted share income tax benefit), compared to $2.44 in fiscal year 2008. GAAP earnings per diluted share from continuing operations for fiscal year 2009 were $2.56 (including the $0.12 per diluted share income tax benefit), compared with $2.27 in fiscal year 2008.
Tom Ryan, Chairman, President, and Chief Executive Officer, said, "We made good progress in 2009 in solidifying our position as the largest pharmacy health care provider in the nation with the broadest capabilities. We continued to make investments and forge strategic alliances that will enable us to capitalize on the evolving health care landscape and further differentiate our offerings in the marketplace. At the same time, we delivered financial performance ahead of our initial plan for the year, including the solid quarter we announced today. I'm very pleased to report continued industry-leading performance in our retail pharmacy business and solid performance in our PBM, which resulted in double-digit EPS growth and significant free cash flow generation."
Loss from Discontinued Operations
In connection with certain business dispositions completed between 1991 and 1997, the Company retained guarantees on store lease obligations for a number of former subsidiaries, including Linens 'n Things. The Company's loss from discontinued operations for the fourth quarter and fiscal year ended December 31, 2009 included $2 million ($3 million net of a $1 million income tax benefit) and $12 million ($19 million net of a $7 million income tax benefit) of lease-related costs, respectively. The loss from discontinued operations for the fourth quarter and fiscal year ended December 31, 2008 included $1 million ($1 million net of a de minimis income tax benefit) and $132 million ($214 million net of an $82 million income tax benefit) of lease-related costs, respectively.
Real Estate Program
During the fourth quarter of 2009, CVS Caremark opened 23 new retail pharmacy stores, and closed 6 retail pharmacy stores and 2 specialty pharmacy stores. In addition, the Company relocated 8 retail pharmacy stores. As of December 31, 2009, the Company operated 7,025 retail pharmacy stores, 49 specialty pharmacy stores, 18 specialty mail order pharmacies and 6 mail order pharmacies in 44 states, the District of Columbia and Puerto Rico.
Teleconference and Webcast
The Company will be holding a conference call today for the investment community at 8:30 am (EST) to discuss its quarterly results. An audio webcast of the conference call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Caremark website at http://info.cvscaremark.com. This webcast will be archived and available on the website for a one-month period following the conference call.
About the Company
CVS Caremark is the largest pharmacy health care provider in the United States. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access, to engage plan participants in behaviors that improve their health, and to lower overall health care costs for plan sponsors and participants. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics. We are also a leading provider of Medicare Part D Prescription Drug Plans. As one of the country's largest pharmacy benefit managers (PBMs), we provide access to a network of approximately 64,000 pharmacies, including approximately 7,000 CVS/pharmacy stores that provide unparalleled service and capabilities. Our clinical expertise includes one of the industry's most comprehensive disease management programs. General information about CVS Caremark is available through the Company's Web site at http://info.cvscaremark.com.
Forward-looking Statements
This press release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the Risk Factors section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q.
– Tables Follow –
CVS CAREMARK CORPORATION Consolidated Statements of Operations (Unaudited) In millions, Fourth Quarter Ended(1) Fiscal Year Ended(1) except per December December December December share amounts 31, 2009 31, 2008 31, 2009 31, 2008 -------------- -------- -------- -------- -------- Net revenues $25,822 $24,142 $98,729 $87,472 Cost of revenues 20,254 18,918 78,349 69,182 ---------------- ------ ----- ------ ----- Gross profit 5,568 5,224 20,380 18,290 Operating expenses 3,673 3,492 13,942 12,244 ------------------ ----- ---- ------ ----- Operating profit 1,895 1,732 6,438 6,046 Interest expense, net 133 151 525 509 --------------------- --- --- --- --- Income from continuing operations before income tax provision 1,762 5,913 1,581 5,537 Income tax provision 711 627 2,205 2,193 -------------------- --- --- ----- ----- Income from continuing operations 1,051 954 3,708 3,344 Loss from discontinued operations, net of tax benefit(2) (2) (1) (12) (132) -------------------------- --- --- --- ---- Net income 1,049 953 3,696 3,212 Preference dividends, net of income tax benefit(3) - 4 - 14 ----------------------------- --- --- --- --- Net income available to common shareholders $1,049 $949 $3,696 $3,198 ----------------------- ------ ---- ------ ------ Basic earnings per common share: Income from continuing operations $0.75 $0.66 $2.59 $2.32 Loss from discontinued operations - - (0.01) (0.09) ---------------------- --- --- ----- ----- Net income $0.75 $0.66 $2.58 $2.23 ---------- ----- ----- ----- ----- Weighted average basic common shares outstanding 1,400 1,437 1,434 1,434 ---------------------- ----- ----- ----- ----- Diluted earnings per common share(3): Income from continuing operations $0.74 $0.65 $2.56 $2.27 Loss from discontinued operations - - (0.01) (0.09) ---------------------- --- --- ----- ----- Net income $0.74 $0.65 $2.55 $2.18 ---------- ----- ----- ----- ----- Weighted average diluted common shares outstanding 1,413 1,467 1,450 1,469 ------------------------ ----- ----- ----- ----- Dividends declared per common share $0.07625 $0.06900 $0.30500 $0.25800 ---------------------- -------- -------- -------- -------- (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively. (2) In connection with certain business dispositions completed between 1991 and 1997, the Company continues to guarantee store lease obligations for a number of former subsidiaries, including Linens 'n Things. On May 2, 2008, Linens Holding Co. and certain affiliates, which operate Linens 'n Things, filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Pursuant to the court order entered on October 16, 2008, Linens Holding Co. is in the process of liquidating the entire Linens 'n Things retail chain. The Company's loss from discontinued operations for the fourth quarter and fiscal year ended December 31, 2009 included $2 million ($3 million net of a $1 million income tax benefit) and $12 million ($19 million net of a $7 million income tax benefit) of lease-related costs, respectively. The loss from discontinued operations for the fourth quarter and fiscal year ended December 31, 2008 included $1 million ($1 million net of a de minimis income tax benefit) and $132 million ($214 million net of an $82 million income tax benefit) of lease- related costs, respectively. (3) Diluted earnings per common share is computed by dividing (i) net income, after accounting for the difference between the dividends on the ESOP preference stock and common stock and after making adjustments for the incentive compensation plans by (ii) basic shares plus the additional shares that would be issued assuming that all dilutive stock awards are exercised and the ESOP preference stock is converted into common stock. The dilutive income adjustment related to preference dividends was $1 million and $3 million for the fourth quarter and fiscal year ended December 31, 2008, respectively.
CVS CAREMARK CORPORATION Consolidated Balance Sheets (Unaudited) December 31, December 31, In millions, except per share amounts 2009 2008 ------------------------------------- ---- ---- Assets: Cash and cash equivalents $1,086 $1,352 Short-term investments 5 -- Accounts receivable, net 5,457 5,384 Inventories 10,343 9,153 Deferred income taxes 506 435 Other current assets 140 202 -------------------- Total current assets 17,537 16,526 Property and equipment, net 7,923 8,125 Goodwill 25,680 25,494 Intangible assets, net 10,127 10,446 Other assets 374 369 ------------ --- --- Total assets $61,641 $60,960 ------------ ------- ------- Liabilities: Accounts payable $3,560 $3,801 Claims and discounts payable 3,075 2,814 Accrued expenses 3,246 3,178 Short-term debt 315 3,044 Current portion of long-term debt 2,104 653 --------------------------------- ----- --- Total current liabilities 12,300 13,490 Long-term debt 8,756 8,057 Deferred income taxes 3,678 3,702 Other long-term liabilities 1,102 1,137 Commitments and contingencies Redeemable noncontrolling interest 37 -- Shareholders' equity: Preference stock, series one ESOP convertible, par value $1.00: 50 shares authorized; no issued and outstanding shares at December 31, 2009 and 4 shares issued and outstanding at December 31, 2008 -- 191 Common stock, par value $0.01: 3,200 shares authorized; 1,612 shares issued and 1,393 shares outstanding at December 31, 2009 and 1,603 shares issued and 1,438 shares outstanding at December 31, 2008 16 16 Treasury stock, at cost: 219 shares at December 31, 2009 and 165 shares at December 31, 2008 (7,610) (5,812) Shares held in trust: 2 shares at December 31, 2009 and December 31, 2008 (56) (56) Capital surplus 27,198 27,280 Retained earnings 16,355 13,098 Accumulated other comprehensive loss (135) (143) -------------------------------------- ---- ---- Total shareholders' equity 35,768 34,574 ----------------------------- ------ ------ Total liabilities and shareholders' equity $61,641 $60,960 ------------------------------------------ ------- -------
CVS CAREMARK CORPORATION Consolidated Statements of Cash Flows (Unaudited) Fiscal Year Ended(1) December 31, December 31, In millions 2009 2008 ----------- ---- ---- Cash flows from operating activities: Cash receipts from revenues $93,568 $82,250 Cash paid for inventory and prescriptions dispensed by retail network pharmacies (73,536) (64,131) Cash paid to other suppliers and employees (13,121) (11,832) Interest received 5 20 Interest paid (542) (574) Income taxes paid (2,339) (1,786) ------------------- ------ ------ Net cash provided by operating activities 4,035 3,947 ----------------------------------------- ----- ----- Cash flows from investing activities: Additions to property and equipment (2,548) (2,180) Proceeds from sale-leaseback transactions 1,562 204 Proceeds from sale or disposal of assets 23 19 Acquisitions (net of cash acquired) and investments (101) (2,651) Purchase of short-term investments (5) -- Sale of short-term investments -- 28 -------------------------------- Net cash used in investing activities (1,069) (4,580) ------------------------------------- ------ ------ Cash flows from financing activities: Increase (decrease) in short-term debt (2,729) 959 Repayment of debt assumed in acquisition (353) Additions to long-term debt 2,800 350 Reductions in long-term debt (653) (2) Dividends paid (439) (383) Derivative settlements (3) Proceeds from exercise of stock options 250 328 Excess tax benefits from stock-based compensation 19 53 Repurchase of common stock (2,477) (23) ------------------------------ ------ --- Net cash provided by (used in) financing activities (3,232) 929 ------------------------------- ------ --- Net increase (decrease) in cash and cash equivalents (266) 296 Cash and cash equivalents at beginning of period 1,352 1,056 -------------------------------------- ----- ----- Cash and cash equivalents at end of period $1,086 $1,352 ------------------------------------------ ------ ------ Reconciliation of net income to net cash provided by operating activities: Net income $3,696 $3,212 Adjustments required to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,389 1,274 Stock-based compensation 165 92 Deferred income taxes and other non-cash items 48 (3) Change in operating assets and liabilities, net of effects of acquisitions: Accounts receivable, net (86) (291) Inventories (1,199) (488) Other current assets 48 12 Other assets (2) 19 Accounts payable and claims and discounts payable 4 (64) Accrued expenses (66) 183 Other long-term liabilities 38 1 ------------------------------- --- -- Net cash provided by operating activities $4,035 $3,947 ----------------------------------------- ------ ------ (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively.
Adjusted Earnings Per Share
(Unaudited)
For internal comparisons, management finds it useful to assess year-to-year performance by adjusting diluted income per share for amortization, which primarily relates to acquisition activities.
The Company defines adjusted earnings per share as income from continuing operations before income taxes plus amortization, less income tax provision and dilutive income adjustment, divided by the weighted average diluted common shares outstanding.
The following is a reconciliation of income from continuing operations before income tax provision to adjusted earnings per share:
In millions, (Unaudited) (Unaudited) except Fourth Quarter Ended(1) Fiscal Year Ended(1) per share December 31, December 31, December 31, December 31, amounts 2009 2008 2009 2008 ----------- ----------- ----------- ----------- ----------- Income from continuing operations before income tax provision $1,762 $1,581 $5,913 $5,537 Amortization 108 111 430 405 Adjusted income from continuing operations before income tax provision 1,870 1,692 6,343 5,942 Adjusted income tax provision(2) 754 671 2,366 2,353 ------------- --- --- ----- ----- Adjusted net income from continuing operations 1,116 1,021 3,977 3,589 Dilutive income adjustment -- (1) -- (3) ----------- --- --- --- --- Adjusted net income from continuing operations available to common shareholders 1,116 1,020 3,977 3,586 ------------- ----- ----- ----- ----- Weighted average diluted common shares outstanding 1,413 1,467 1,450 1,469 Adjusted earnings per share from continuing operations(3) $0.79 $0.70 $2.74 $2.44 -------------- ----- ----- ----- ----- (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively. (2) The adjusted income tax provision is computed using the same effective income tax rate from the consolidated statement of operations. (3) Excluding the impact of approximately $7 million and $167 million of previously unrecognized tax benefits that were recognized in the fourth quarter and fiscal year ended December 31, 2009, adjusted earnings per share from continuing operations would have been $0.78 and $2.62 for the fourth quarter and fiscal year ended December 31, 2009, respectively.
Free Cash Flow
(Unaudited)
The Company defines free cash flow as net cash provided by operating activities less net additions to properties and equipment (i.e., additions to property and equipment plus proceeds from sale-leaseback transactions).
The following is a reconciliation of net cash provided by operating activities to free cash flow:
(Unaudited) Fiscal Year Ended(1) In millions December 31, December 31, ----------- 2009 2008 ----------- ----------- Net income $3,696 $3,212 Non-cash charges (including depreciation and amortization) 1,602 1,363 Change in operating assets and liabilities, net of effects of acquisitions (1,263) (628) ------------------------------------------- ------ ---- Net cash provided by operating activities 4,035 3,947 Subtract: Additions to property and equipment (2,548) (2,180) Add: Proceeds from sale-leaseback transactions 1,562 204 ----------------------------------- ----- --- Free cash flow $3,049 $1,971 -------------- ------ ------ (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively.
Supplemental Unaudited Information
The Company evaluates its Pharmacy Services and Retail Pharmacy segment performance based on net revenue, gross profit and operating profit before the effect of discontinued operations and certain intersegment activities and charges. The Company evaluates the performance of its Corporate segment based on operating expenses before the effect of discontinued operations and certain intersegment activities and charges. The following is a reconciliation of the Company's business segments to the accompanying consolidated financial statements:
Pharmacy Retail Services Pharmacy Intersegment Segment Segment Corporate Eliminations Consolidated In millions (2)(4) (4) Segment (3)(4) Totals ----------- -------- -------- --------- ------------- ------------ Fourth Quarter Ended(1): December 31, 2009: Net revenues $13,492 $14,455 $-- $(2,125) $25,822 Gross profit 1,075 4,511 -- (18) 5,568 Operating profit (loss) 833 1,220 (140) (18) 1,895 December 31, 2008(5): Net revenues $11,784 $13,832 $-- $(1,474) $24,142 Gross profit 1,020 4,204 -- -- 5,224 Operating profit (loss) 809 1,051 (128) -- 1,732 Fiscal Year Ended(1): December 31, 2009: Net revenues $51,065 $55,355 $-- $(7,691) $98,729 Gross profit 3,835 16,593 -- (48) 20,380 Operating profit (loss) 2,866 4,159 (539) (48) 6,438 December 31, 2008(5): Net revenues $43,769 $48,990 $-- $(5,287) $87,472 Gross profit 3,550 14,741 -- (1) 18,290 Operating profit (loss) 2,755 3,753 (461) (1) 6,046 (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively. (2) Net revenues of the Pharmacy Services segment include approximately $1.7 billion and $1.6 billion of Retail co-payments for the fourth quarters ended December 31, 2009 and December 31, 2008, respectively. Net revenues of the Pharmacy Services segment include approximately $6.9 billion and $6.3 billion of Retail co-payments for the fiscal years ended December 31, 2009 and December 31, 2008, respectively. (3) Intersegment eliminations relate to two types of transactions: (i) Intersegment revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Pharmacy Services and Retail Pharmacy segments record the revenue on a standalone basis and (ii) Intersegment revenues, gross profit and operating profit that occur when Pharmacy Services segment customers, through the Company's intersegment activities (such as the Maintenance Choice Program), elect to pick-up their maintenance prescriptions at Retail Pharmacy segment stores instead of receiving them through the mail. When this occurs, both the Pharmacy Services and Retail Pharmacy segments will record the revenue, gross profit and operating profit on a standalone basis. (4) When Pharmacy Services segment customers elect to pick-up their maintenance prescriptions at Retail Pharmacy segment stores through the Company's intersegment activities (such as the Maintenance Choice program) instead of receiving them through the mail, both segments record the corresponding revenue, gross profit and operating profit in their respective segment results. As a result, both the Pharmacy Services and the Retail Pharmacy segments include the following results associated with this activity: net revenues of $242 million and $692 million for the fourth quarter and fiscal year ended December 31, 2009, respectively; net revenues of $4 million and $8 million for the fourth quarter and fiscal year ended December 31, 2008, respectively; gross profit of $18 million and $48 million for the fourth quarter and fiscal year ended December 31, 2009, respectively; gross profit of less than $1 million and $1 million for the fourth quarter and fiscal year ended December 31, 2008, respectively; operating profit of $18 million and $48 million for the fourth quarter and fiscal year ended December 31, 2009, respectively; operating profit of less than $1 million and $1 million for the fourth quarter and fiscal year ended December 31, 2008, respectively. (5) The fourth quarter and fiscal year ended December 31, 2008 have been revised to conform to the current presentation of our reportable segments.
Supplemental Information
(Unaudited)
Pharmacy Services Segment
The following table summarizes the Pharmacy Services segment's performance for the respective periods:
(Unaudited) (Unaudited) Fourth Quarter Ended(1) Fiscal Year Ended(1) December 31, December 31, December 31, December 31, In millions 2009 2008(6) 2009 2008(6) --------- -------------------------- -------------------------- As reported: ---------- Net revenues $13,492 $11,784 $51,065 $43,769 Gross profit 1,075 1,020 3,835 3,550 Gross profit % of net revenues 8.0% 8.7% 7.5% 8.1% Operating expenses 242 211 969 795 Operating expense % of net revenues 1.8% 1.8% 1.9% 1.8% Operating profit 833 809 2,866 2,755 Operating profit % of net revenues 6.2% 6.9% 5.6% 6.3% -------------------- --- --- --- --- Net revenues(2): Mail choice(3) $4,273 $4,020 $16,711 $14,909 Pharmacy network(4) 9,132 7,670 34,004 28,482 Other 87 94 350 378 Pharmacy claims processed(2): Total 168.1 176.3 658.5 633.4 Mail choice(3) 16.7 16.0 66.0 60.9 Pharmacy network(4) 151.4 160.3 592.5 572.5 Generic dispensing rate(2): Total 68.9% 66.7% 68.2% 65.1% Mail choice(3) 57.4% 55.2% 56.5% 54.4% Pharmacy network(4) 70.0% 67.7% 69.3% 66.2% Mail choice penetration rate(5) 23.6% 21.7% 23.8% 22.9% ------------------- ---- ---- ---- ---- (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively. (2) Pharmacy network net revenues, claims processed and generic dispensing rates do not include Maintenance Choice, which are included within the mail choice category. (3) Mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims, as well as 90-day claims filled at retail under the Maintenance Choice(TM) program. (4) Pharmacy network is defined as claims filled at retail pharmacies, including CVS/pharmacy stores. (5) Excluding the impact of RxAmerica, the mail choice penetration rate would have been 26.1% and 26.2% for the fourth quarter of 2009 and for the fiscal year ended December 31, 2009, respectively. (6) The fourth quarter and fiscal year ended December 31, 2008 have been revised to conform to the current presentation of our reportable segments.
EBITDA and EBITDA per Adjusted Claim
(Unaudited)
The Company defines EBITDA as income before interest, taxes, depreciation and amortization. We define EBITDA per adjusted claim as EBITDA divided by adjusted pharmacy claims. Adjusted pharmacy claims normalize the claims volume statistic for the difference in average days' supply for mail and retail claims. Adjusted pharmacy claims are calculated by multiplying 90-day claims (the majority of total mail claims) by 3 and adding the 30-day claims. EBITDA can be reconciled to operating profit, which we believe to be the most directly comparable GAAP financial measure.
The following is a reconciliation of operating profit to EBITDA:
Pharmacy Services Segment In millions, except (Unaudited) (Unaudited) per adjusted Fourth Quarter Ended (1) Fiscal Year Ended (1) claim amounts December 31, December 31, December 31, December 31, 2009 2008(2)(3) 2009 2008(2)(3) Operating profit $833 $809 $2,866 $2,755 Depreciation and amortization 100 91 377 357 EBITDA $933 $900 $3,243 $3,112 Adjusted claims 198.2 204.8 777.5 742.3 EBITDA per adjusted claim $4.71 $4.40 $4.17 $4.19 (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively. (2) Excluding the impact of RxAmerica, EBITDA per adjusted claim would have been $4.89 for the fourth quarter of 2009 and $4.43 for the fiscal year ended December 31, 2009. (3) The fourth quarter and fiscal year ended December 31, 2009 have been revised to conform to the current presentation of the Pharmacy Services segment's operating profit and depreciation and amortization.
Supplemental Information
(Unaudited)
Retail Pharmacy Segment
The following table summarizes the Retail Pharmacy segment's performance for the respective periods:
(Unaudited) (Unaudited) Fourth Quarter Ended(1) Fiscal Year Ended(1) December 31, December 31, December 31, December 31, In millions 2009 2008(3) 2009 2008(3) ----------- -------------------------- -------------------------- Net revenues $14,455 $13,832 $55,355 $48,990 Gross profit 4,511 4,204 16,593 14,741 Gross profit % of net revenues 31.2% 30.4% 30.0% 30.1% Operating expenses 3,291 3,153 12,434 10,988 Operating expense % of net revenues 22.8% 22.8% 22.5% 22.4% Operating profit 1,220 1,051 4,159 3,753 Operating profit % of net revenues 8.4% 7.6% 7.5% 7.7% -------------------- --- --- --- --- Net revenue increase: Total 4.5% 18.8% 13.0% 8.7% Pharmacy 6.0% 17.2% 13.1% 8.1% Front store 1.5% 22.4% 12.7% 10.1% Same store sales increase(2): Total 4.9% 3.6% 5.0% 4.5% Pharmacy 7.3% 4.5% 6.9% 4.8% Front store 0.3% 1.8% 1.2% 3.6% Generic dispensing rates 70.6% 68.0% 69.9% 67.4% Pharmacy % of total revenues 66.8% 65.8% 67.5% 67.5% Third party % of pharmacy revenue 97.1% 96.2% 96.9% 96.1% Retail prescriptions filled 159.0 152.6 616.5 559.0 -------------- ----- ----- ----- ----- (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively. (2) Same store sales increase includes the Longs Drug stores beginning in November 2009. (3) The fourth quarter and fiscal year ended December 31, 2008 have been revised to conform to the current presentation of our reportable segments.
Supplemental Information
(Unaudited)
Corporate Segment
The following table summarizes our Corporate segment's performance for the respective periods:
(Unaudited) (Unaudited) Fourth Quarter Ended(1) Fiscal Year Ended(1) December 31, December 31, December 31, December 31, In millions 2009 2008 2009 2008 ----------- ----------- ----------- ----------- ----------- Operating expenses $140 $128 $539 $461 ------------------ ---- ---- ---- ---- (1) On December 23, 2008, the Company's Board of Directors approved a change in the Company's fiscal year end from the Saturday nearest December 31 of each year to December 31 of each year to better reflect the Company's position in the health care, rather than the retail, industry. As you review the Company's operating performance, please consider that the fourth quarter of 2009 and 2008 include 92 days and 95 days, respectively, and the fiscal years ended December 31, 2009 and 2008 include 365 days and 368 days, respectively.
SOURCE CVS Caremark Corporation
Share this article