WOONSOCKET, R.I., Nov. 3, 2011 /PRNewswire/ -- CVS Caremark Corporation (NYSE: CVS), today announced revenues, operating profit, and net income for the three months ended September 30, 2011.
(Logo: http://photos.prnewswire.com/prnh/20090226/NE75914LOGO )
Third Quarter Year-Over-Year Highlights:
- Net revenues increased 12.5% to a record $26.7 billion
- Pharmacy Services segment revenues increased 25.8%
- Retail Pharmacy segment revenues increased 3.8%, with same stores sales up 2.3%
- Adjusted EPS from continuing operations of $0.70
- GAAP diluted EPS from continuing operations of $0.65
Year-to-Date Highlights:
- Generated free cash flow of $3.9 billion
- Generated cash flow from operations of $5.0 billion
Guidance:
- Company narrows full-year 2011 EPS guidance range to higher end of previous range
- Full-year adjusted EPS from continuing operations revised to $2.77 - $2.81
- Full-year GAAP diluted EPS from continuing operations revised to $2.57 - $2.61
- Company reconfirms full-year free cash flow in the range of $4.0 billion - $4.2 billion
- Company reconfirms full-year cash flow from operations in the range of $5.5 billion - $5.6 billion
Revenues
Net revenues for the three months ended September 30, 2011 increased $3.0 billion to $26.7 billion, up from $23.7 billion during the three months ended September 30, 2010.
Revenues in the Pharmacy Services segment increased 25.8% to $14.8 billion in the three months ended September 30, 2011. This increase was primarily associated with the addition of a previously-announced, long-term contract with Aetna, Inc., as well as new activity resulting from our acquisition of the Medicare prescription drug business of Universal American Corp. ("UAM Medicare Part D Business") in the second quarter of 2011. Pharmacy network claims processed during the three months ended September 30, 2011 increased 39.8% to 179.2 million, compared to 128.2 million in the prior year period. The increase in pharmacy network claims was primarily due to the Company's recent acquisition of the UAM Medicare Part D Business, the addition of the Aetna contract, and an increase in covered lives in our existing Medicare Part D Business. Mail choice claims processed during the three months ended September 30, 2011 increased approximately 8.0% to 17.5 million compared to 16.2 million in the prior year period. The increase in the mail choice claim volume was also driven by the addition of the Aetna contract.
Revenues in the Retail Pharmacy segment increased 3.8% to $14.7 billion in the three months ended September 30, 2011. Same store sales increased 2.3% over the prior year period. Pharmacy same store sales rose 2.4% and include a positive impact from Maintenance Choice™ of approximately 140 basis points on a net basis (i.e., a positive impact of approximately 170 basis points on a gross basis, net of approximately 30 basis points from the conversion of 30-day prescriptions at retail to 90-day prescriptions under the Maintenance Choice program). Pharmacy same store sales were negatively impacted by approximately 200 basis points due to recent generic introductions. Front store same store sales increased 2.0% in the three months ended September 30, 2011.
Income from Continuing Operations Attributable to CVS Caremark
Income from continuing operations attributable to CVS Caremark for the three months ended September 30, 2011, increased $52 million to $868 million, compared with $816 million during the three months ended September 30, 2010. The increase in income from continuing operations was primarily driven by improved operating profit in the Retail Pharmacy segment. The effective income tax rate during the quarter was 39.3% compared to 39.2% in the prior year period. Adjusted earnings per share from continuing operations attributable to CVS Caremark ("Adjusted EPS") for the three months ended September 30, 2011 and 2010 was $0.70 and $0.64, respectively. Adjusted EPS excludes $118 million and $108 million of intangible asset amortization related to acquisition activity in the three months ended September 30, 2011 and 2010, respectively. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for the three months ended September 30, 2011 and 2010 was $0.65 and $0.60, respectively.
Larry Merlo, President and Chief Executive Officer, stated, "I'm very pleased with our third quarter results, which were two cents above the high end of our guidance range. This outperformance was primarily driven by better-than-expected performance in our PBM as well as accretion from our recently-executed $1 billion accelerated share repurchase. Between dividends and share repurchases, we have returned over $3 billion to our shareholders year to date and enhancing shareholder returns remains a high priority for us."
Mr. Merlo continued, "Our retail drugstore business continues to grow and gain share while our PBM continues to demonstrate success in the selling season, with strong client retention and significant new business. I fully expect the Company to deliver substantial free cash flow for the foreseeable future, which should enable us to continue to return significant value to our shareholders.
Discontinued Operations
On September 26, 2011, the Company entered into an agreement with AmerisourceBergen Corporation ("ABC") to sell its TheraCom, L.L.C. ("TheraCom") subsidiary for $250 million. On November 1, 2011, the Company completed the sale of TheraCom to ABC. TheraCom is a provider of commercialization support services to the biotech and pharmaceutical industry. The TheraCom business has historically been part of the Company's Pharmacy Services segment. The results of the TheraCom business are presented as discontinued operations and have been excluded from both continuing operations and segment results for all periods presented.
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 Linen 'n Things which filed for bankruptcy in 2008. The Company's income (loss) from discontinued operations includes lease-related costs which the Company believes it will likely be required to satisfy pursuant to its Linens 'n Things lease guarantees.
Real Estate Program
During the three months ended September 30, 2011, the Company opened 39 new retail drugstores and closed one retail drugstore. In addition, the Company relocated 14 retail drugstores. As of September 30, 2011, the Company operated 7,384 locations, included in which were 7,304 retail drugstores, 31 retail specialty pharmacy stores, 32 apothecary pharmacy stores, 13 specialty mail order pharmacies and four mail order pharmacies in 44 states, the District of Columbia and Puerto Rico.
Guidance
Taking into account the strong underlying results year to date as well as solid expectations for the remainder of the year, the Company narrowed its earnings per share guidance range for the full year 2011 to the higher end of the previous range. The revised guidance includes the accretive impact of the recently-executed accelerated share repurchase as well as the dilutive impact from the reclassification of the TheraCom business as discontinued operations for the full year. The Company now expects adjusted EPS from continuing operations to be in the range of $2.77 to $2.81 and GAAP earnings per share from continuing operations to be in the range of $2.57 to $2.61, compared to its previous guidance range of $2.75 to $2.81, and $2.55 to $2.61, respectively. The Company also reconfirmed that it expects to generate cash flow from operations in the range of $5.5 billion to $5.6 billion and free cash flow in the range of $4.0 billion to $4.2 billion for the full year 2011.
Teleconference and Webcast
The Company will be holding a conference call today for the investment community at 8:30 am (EDT) to discuss its quarterly results. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Caremark website at http://info.cvscaremark.com/investors. This webcast will be archived and available on the website for a one-year period following the conference call.
About the Company
CVS Caremark is the largest pharmacy health care provider in the United States with integrated offerings across the entire spectrum of pharmacy care. We are uniquely positioned to engage plan members in behaviors that improve their health and to lower overall health care costs for health plans, plan sponsors and their members. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics, and is a leading provider of Medicare Part D Prescription Drug Plans. As one of the country's largest pharmacy benefits managers (PBMs), we provide access to a network of approximately 65,000 pharmacies, including more than 7,300 CVS/pharmacy® stores that provide unparalleled service and capabilities. Our clinical offerings include our signature Pharmacy Advisor™ program as well as innovative generic step therapy and genetic benefit management programs that promote more cost effective and healthier behaviors and improve health care outcomes. General information about CVS Caremark is available through the Company's website 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 year ended December 31, 2010 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 Condensed Consolidated Statements of Income (Unaudited) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
|||||||
In millions, except per share amounts |
2011 |
2010 |
2011 |
2010 |
||||
Net revenues |
$ 26,674 |
$ 23,711 |
$ 78,783 |
$ 71,189 |
||||
Cost of revenues |
21,496 |
18,696 |
63,777 |
56,424 |
||||
Gross profit |
5,178 |
5,015 |
15,006 |
14,765 |
||||
Operating expenses |
3,594 |
3,537 |
10,633 |
10,389 |
||||
Operating profit |
1,584 |
1,478 |
4,373 |
4,376 |
||||
Interest expense, net |
155 |
137 |
437 |
399 |
||||
Income before income tax provision |
1,429 |
1,341 |
3,936 |
3,977 |
||||
Income tax provision |
562 |
526 |
1,547 |
1,575 |
||||
Income from continuing operations |
867 |
815 |
2,389 |
2,402 |
||||
Income (loss) from discontinued operations, net of tax |
— |
(7) |
5 |
(3) |
||||
Net income |
867 |
808 |
2,394 |
2,399 |
||||
Net loss attributable to noncontrolling interest |
1 |
1 |
3 |
2 |
||||
Net income attributable to CVS Caremark |
$ 868 |
$ 809 |
$ 2,397 |
$ 2,401 |
||||
Basic earnings per common share: |
||||||||
Income from continuing operations attributable to CVS Caremark |
$ 0.65 |
$ 0.60 |
$ 1.77 |
$ 1.76 |
||||
Income (loss) from discontinued operations attributable to CVS Caremark |
— |
(0.01) |
0.01 |
(0.01) |
||||
Net income attributable to CVS Caremark |
$ 0.65 |
$ 0.59 |
$ 1.78 |
$ 1.75 |
||||
Weighted average basic common shares outstanding |
1,332 |
1,360 |
1,350 |
1,368 |
||||
Diluted earnings per common share: |
||||||||
Income from continuing operations attributable to CVS Caremark |
$ 0.65 |
$ 0.60 |
$ 1.76 |
$ 1.75 |
||||
Income (loss) from discontinued operations attributable to CVS Caremark |
— |
(0.01) |
0.01 |
(0.01) |
||||
Net income attributable to CVS Caremark |
$ 0.65 |
$ 0.59 |
$ 1.77 |
$ 1.74 |
||||
Weighted average diluted common shares outstanding |
1,340 |
1,368 |
1,356 |
1,378 |
||||
Dividends declared per common share |
$ 0.1250 |
$ 0.0875 |
$ 0.3750 |
$ 0.2625 |
||||
CVS CAREMARK CORPORATION Condensed Consolidated Balance Sheets (Unaudited) |
||||
In millions, except per share amounts |
September 30, |
December 31, |
||
Assets: |
||||
Cash and cash equivalents |
$ 1,707 |
$ 1,427 |
||
Short-term investments |
5 |
4 |
||
Accounts receivable, net |
5,901 |
4,925 |
||
Inventories |
10,379 |
10,695 |
||
Deferred income taxes |
444 |
511 |
||
Other current assets |
502 |
144 |
||
Total current assets |
18,938 |
17,706 |
||
Property and equipment, net |
8,642 |
8,322 |
||
Goodwill |
26,506 |
25,669 |
||
Intangible assets, net |
9,947 |
9,784 |
||
Other assets |
1,218 |
688 |
||
Total assets |
$ 65,251 |
$ 62,169 |
||
Liabilities: |
||||
Accounts payable |
$ 4,387 |
$ 4,026 |
||
Claims and discounts payable |
3,103 |
2,569 |
||
Accrued expenses |
4,259 |
3,070 |
||
Short-term debt |
530 |
300 |
||
Current portion of long-term debt |
71 |
1,105 |
||
Total current liabilities |
12,350 |
11,070 |
||
Long-term debt |
10,167 |
8,652 |
||
Deferred income taxes |
3,868 |
3,655 |
||
Other long-term liabilities |
1,348 |
1,058 |
||
Commitments and contingencies |
||||
Redeemable noncontrolling interest |
31 |
34 |
||
Shareholders' equity: |
||||
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or |
||||
outstanding |
— |
— |
||
Common stock, par value $0.01: 3,200 shares authorized; 1,636 shares |
||||
issued and 1,308 shares outstanding at September 30, 2011 and 1,624 |
||||
shares issued and 1,363 shares outstanding at December 31, 2010 |
16 |
16 |
||
Treasury stock, at cost: 326 shares at September 30, 2011 and 259 |
||||
shares at December 31, 2010 |
(11,500) |
(9,030) |
||
Shares held in trust: 2 shares at September 30, 2011 and December 31, 2010 |
(56) |
(56) |
||
Capital surplus |
27,987 |
27,610 |
||
Retained earnings |
21,192 |
19,303 |
||
Accumulated other comprehensive loss |
(152) |
(143) |
||
Total shareholders' equity |
37,487 |
37,700 |
||
Total liabilities and shareholders' equity |
$ 65,251 |
$ 62,169 |
||
CVS CAREMARK CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) |
||||
Nine Months Ended |
||||
September 30, |
||||
In millions |
2011 |
2010 |
||
Cash flows from operating activities: |
||||
Cash receipts from customers |
$ 72,875 |
$ 68,524 |
||
Cash paid for inventory and prescriptions dispensed by retail network pharmacies |
(55,625) |
(52,953) |
||
Cash paid to other suppliers and employees |
(10,092) |
(10,346) |
||
Interest received |
3 |
3 |
||
Interest paid |
(454) |
(439) |
||
Income taxes paid |
(1,672) |
(1,785) |
||
Net cash provided by operating activities |
5,035 |
3,004 |
||
Cash flows from investing activities: |
||||
Purchases of property and equipment |
(1,168) |
(1,379) |
||
Proceeds from sale-leaseback transactions |
11 |
124 |
||
Proceeds from sale of property and equipment |
1 |
24 |
||
Acquisitions (net of cash acquired) and other investments |
(1,406) |
(158) |
||
Purchase of short-term investments |
(3) |
— |
||
Maturity of short-term investments |
2 |
1 |
||
Net cash used in investing activities |
(2,563) |
(1,388) |
||
Cash flows from financing activities: |
||||
Increase in short-term debt |
230 |
1,069 |
||
Proceeds from issuance of long-term debt |
1,463 |
991 |
||
Repayments of long-term debt |
(1,149) |
(2,102) |
||
Dividends paid |
(508) |
(360) |
||
Derivative settlements |
(19) |
(5) |
||
Proceeds from exercise of stock options |
341 |
171 |
||
Excess tax benefits from stock-based compensation |
12 |
13 |
||
Repurchase of common stock |
(2,553) |
(1,500) |
||
Other |
(9) |
— |
||
Net cash used in financing activities |
(2,192) |
(1,723) |
||
Net increase (decrease) in cash and cash equivalents |
280 |
(107) |
||
Cash and cash equivalents at beginning of period |
1,427 |
1,086 |
||
Cash and cash equivalents at end of period |
$ 1,707 |
$ 979 |
||
Reconciliation of net income to net cash provided by operating activities: |
||||
Net income |
$ 2,394 |
$ 2,399 |
||
Adjustments required to reconcile net income to net cash provided by operating activities: |
||||
Depreciation and amortization |
1,172 |
1,096 |
||
Stock-based compensation |
100 |
112 |
||
Deferred income taxes and other non-cash items |
134 |
43 |
||
Change in operating assets and liabilities, net of effects of acquisitions: |
||||
Accounts receivable, net |
(479) |
346 |
||
Inventories |
316 |
(242) |
||
Other current assets |
(173) |
(41) |
||
Other assets |
(52) |
11 |
||
Accounts payable and claims and discounts payable |
716 |
(112) |
||
Accrued expenses |
980 |
(567) |
||
Other long-term liabilities |
(73) |
(41) |
||
Net cash provided by operating activities |
$ 5,035 |
$ 3,004 |
||
Adjusted Earnings Per Share |
|
(Unaudited) |
|
For internal comparisons, management finds it useful to assess year-to-year performance by adjusting diluted earnings per share for amortization, which primarily relates to acquisition activities. |
|
The Company defines adjusted earnings per share as income before income tax provision plus amortization, less adjusted income tax provision, plus net loss attributable to noncontrolling interest divided by the weighted average diluted common shares outstanding. |
|
The following is a reconciliation of income before income tax provision to adjusted earnings per share: |
|
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
|||||||
In millions, except per share amounts |
2011 |
2010(2) |
2011 |
2010(2) |
||||
Income before income tax provision |
$ 1,429 |
$ 1,341 |
$ 3,936 |
$ 3,977 |
||||
Amortization |
118 |
108 |
338 |
319 |
||||
Adjusted income before income tax provision |
1,547 |
1,449 |
4,274 |
4,296 |
||||
Adjusted income tax provision(1) |
608 |
568 |
1,679 |
1,701 |
||||
Adjusted income from continuing operations |
939 |
881 |
2,595 |
2,595 |
||||
Net loss attributable to noncontrolling interest |
1 |
1 |
3 |
2 |
||||
Adjusted income from continuing operations attributable to CVS Caremark |
$ 940 |
$ 882 |
$ 2,598 |
$ 2,597 |
||||
Weighted average diluted common shares outstanding |
1,340 |
1,368 |
1,356 |
1,378 |
||||
Adjusted earnings per share from continuing operations attributable to CVS Caremark |
$ 0.70 |
$ 0.64 |
$ 1.91 |
$ 1.89 |
||||
(1) The adjusted income tax provision is computed using the effective income tax rate from the condensed consolidated statement of income. (2) The adjusted results for the three and nine months ended September 30, 2010 have been revised to reflect the results of TheraCom as discontinued operations. |
||||||||
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: |
|
Nine Months Ended |
|||||
September 30, |
|||||
In millions |
2011 |
2010 |
|||
Net cash provided by operating activities |
$ 5,035 |
$ 3,004 |
|||
Subtract: Additions to property and equipment |
(1,168) |
(1,379) |
|||
Add: Proceeds from sale-leaseback transactions |
11 |
124 |
|||
Free cash flow |
$ 3,878 |
$ 1,749 |
|||
Supplemental Information |
|
(Unaudited) |
|
The Company evaluates its Pharmacy Services and Retail Pharmacy segment performance based on net revenue, gross profit and operating profit before the effect of nonrecurring charges and gains and certain intersegment activities. The Company evaluates the performance of its Corporate segment based on operating expenses before the effect of nonrecurring charges and gains and certain intersegment activities. The following is a reconciliation of the Company's segments to the accompanying consolidated financial statements: |
|
In millions |
Pharmacy |
Retail |
Corporate |
Intersegment |
Consolidated |
|||||
Three Months Ended |
||||||||||
September 30, 2011: |
||||||||||
Net revenues |
$ 14,798 |
$ 14,693 |
$ -- |
$ (2,817) |
$ 26,674 |
|||||
Gross profit |
914 |
4,306 |
-- |
(42) |
5,178 |
|||||
Operating profit (loss) |
657 |
1,123 |
(154) |
(42) |
1,584 |
|||||
September 30, 2010(3): |
||||||||||
Net revenues |
11,762 |
14,159 |
-- |
(2,210) |
23,711 |
|||||
Gross profit |
873 |
4,181 |
-- |
(39) |
5,015 |
|||||
Operating profit (loss) |
646 |
1,039 |
(168) |
(39) |
1,478 |
|||||
Nine Months Ended |
||||||||||
September 30, 2011: |
||||||||||
Net revenues |
43,000 |
44,106 |
-- |
(8,323) |
78,783 |
|||||
Gross profit |
2,263 |
12,860 |
-- |
(117) |
15,006 |
|||||
Operating profit (loss) |
1,496 |
3,459 |
(465) |
(117) |
4,373 |
|||||
September 30, 2010(3): |
||||||||||
Net revenues |
35,151 |
42,448 |
-- |
(6,410) |
71,189 |
|||||
Gross profit |
2,460 |
12,397 |
-- |
(92) |
14,765 |
|||||
Operating profit (loss) |
1,763 |
3,164 |
(459) |
(92) |
4,376 |
|||||
(1) Net revenues of the Pharmacy Services segment include approximately $1.9 billion and $1.6 billion of retail co-payments for the three months ended September 30, 2011 and 2010, respectively, as well as $6.0 billion and $5.0 billion of retail co-payments for the nine months ended September 30, 2011 and 2010, respectively. (2) 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 record the revenue, gross profit and operating profit on a standalone basis. As a result, both the Pharmacy Services and the Retail Pharmacy segments include the following results associated with this activity: net revenues of $657 million and $489 million for the three months ended September 30, 2011 and 2010, respectively, and $1.8 billion and $1.3 billion for the nine months ended September 30, 2011 and 2010, respectively; gross profit and operating profit of $42 million and $39 million for the three months ended September 30, 2011 and 2010, respectively, and $117 million and $92 million for the nine months ended September 30, 2011 and 2010, respectively. (3) The results of the Pharmacy Services segment for the three and nine months ended September 30, 2010 have been revised to reflect the results of TheraCom as discontinued operations. |
|
Supplemental Information |
|
(Unaudited) |
|
Pharmacy Services Segment |
|
The following table summarizes the Pharmacy Services segment's performance for the respective periods: |
|
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
|||||||
In millions |
2011 |
2010(4) |
2011 |
2010(4) |
||||
Net revenues |
$ 14,798 |
$ 11,762 |
$ 43,000 |
$ 35,151 |
||||
Gross profit |
914 |
873 |
2,263 |
2,460 |
||||
Gross profit % of net revenues |
6.2% |
7.4% |
5.3% |
7.0% |
||||
Operating expenses |
257 |
227 |
767 |
697 |
||||
Operating expense % of net revenues |
1.7% |
1.9% |
1.8% |
2.0% |
||||
Operating profit |
657 |
646 |
1,496 |
1,763 |
||||
Operating profit % of net revenues |
4.4% |
5.5% |
3.5% |
5.0% |
||||
Net revenues(1): |
||||||||
Mail choice(2) |
$ 4,741 |
$ 4,071 |
$ 13,715 |
$ 12,010 |
||||
Pharmacy network(3) |
10,003 |
7,615 |
29,116 |
22,915 |
||||
Other |
54 |
76 |
169 |
226 |
||||
Pharmacy claims processed(1): |
||||||||
Total |
196.7 |
144.4 |
563.7 |
436.0 |
||||
Mail choice(2) |
17.5 |
16.2 |
52.8 |
47.6 |
||||
Pharmacy network(3) |
179.2 |
128.2 |
510.9 |
388.4 |
||||
Generic dispensing rate(1): |
||||||||
Total |
74.3% |
72.0% |
74.0% |
71.1% |
||||
Mail choice(2) |
65.0% |
62.4% |
64.4% |
60.8% |
||||
Pharmacy network(3) |
75.3% |
73.1% |
75.0% |
72.3% |
||||
Mail choice penetration rate |
21.8% |
26.3% |
22.8% |
25.7% |
||||
(1) Pharmacy network net revenues, claims processed and generic dispensing rates do not include Maintenance Choice, which are included within the mail choice category. (2) Mail choice is defined as claims filled at a Pharmacy Services' mail facility, which include specialty mail claims, as well as 90-day claims filled at retail under the Maintenance Choice program. (3) Pharmacy network is defined as claims filled at retail pharmacies, including our retail drugstores, but excluding Maintenance Choice activity. (4) The results of the Pharmacy Services segment for the three and nine months ended September 30, 2010 have been revised to reflect the results of TheraCom as discontinued operations. |
||||||||
EBITDA and EBITDA per Adjusted Claim |
|
(Unaudited) |
|
The Company defines EBITDA as earnings 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. |
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The following is a reconciliation of operating profit to EBITDA for the Pharmacy Services segment: |
|
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
|||||||
In millions, except per adjusted claim amounts |
2011 |
2010(1) |
2011 |
2010(1) |
||||
Operating profit |
$ 657 |
$ 646 |
$ 1,496 |
$ 1,763 |
||||
Depreciation and amortization |
112 |
98 |
317 |
291 |
||||
EBITDA |
769 |
744 |
1,813 |
2,054 |
||||
Adjusted claims |
229.2 |
173.9 |
661.7 |
522.7 |
||||
EBITDA per adjusted claim |
$ 3.35 |
$ 4.27 |
$ 2.74 |
$ 3.93 |
||||
(1) The results of the Pharmacy Services segment for the three and nine months ended September 30, 2010 have been revised to reflect the results of TheraCom as discontinued operations. |
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Supplemental Information |
|
(Unaudited) |
|
Retail Pharmacy Segment |
|
The following table summarizes the Retail Pharmacy segment's performance for the respective periods: |
|
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
|||||||
In millions |
2011 |
2010 |
2011 |
2010 |
||||
Net revenues |
$14,693 |
$14,159 |
$44,106 |
$42,448 |
||||
Gross profit |
4,306 |
4,181 |
12,860 |
12,397 |
||||
Gross profit % of net revenues |
29.3% |
29.5% |
29.2% |
29.2% |
||||
Operating expenses |
3,183 |
3,142 |
9,401 |
9,233 |
||||
Operating expense % of net revenues |
21.7% |
22.2% |
21.3% |
21.8% |
||||
Operating profit |
1,123 |
1,039 |
3,459 |
3,164 |
||||
Operating profit % of net revenues |
7.6% |
7.3% |
7.8% |
7.5% |
||||
Net revenue increase: |
||||||||
Total |
3.8% |
4.1% |
3.9% |
3.8% |
||||
Pharmacy |
3.6% |
4.3% |
4.2% |
4.4% |
||||
Front store |
4.2% |
3.6% |
3.3% |
2.5% |
||||
Same store sales increase: |
||||||||
Total |
2.3% |
2.5% |
2.3% |
2.3% |
||||
Pharmacy |
2.4% |
3.0% |
2.8% |
3.2% |
||||
Front store |
2.0% |
1.4% |
1.1% |
0.4% |
||||
Generic dispensing rate |
75.7% |
73.5% |
75.5% |
72.8% |
||||
Pharmacy % of total revenues |
68.5% |
68.7% |
68.5% |
68.4% |
||||
Third party % of pharmacy revenue |
97.9% |
97.3% |
97.8% |
97.3% |
||||
Retail prescriptions filled |
161.0 |
157.7 |
488.9 |
472.5 |
||||
Adjusted Earnings Per Share Guidance |
|
(Unaudited) |
|
The following reconciliation of estimated income before income tax provision to estimated adjusted earnings per share contains forward-looking information that is subject to risks and uncertainties that could cause actual results to differ materially. 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 year ended December 31, 2010 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q. For internal comparisons, management finds it useful to assess year-to-year performance by adjusting diluted earnings per share for amortization, which primarily relates to acquisition activities. |
|
Year Ending |
||||
In millions, except per share amounts |
December 31, 2011 |
|||
Income before income tax provision |
$ 5,671 |
$ 5,749 |
||
Amortization |
453 |
453 |
||
Adjusted income before income tax provision |
6,124 |
6,202 |
||
Adjusted income tax provision |
2,401 |
2,426 |
||
Adjusted income from continuing operations |
3,723 |
3,776 |
||
Net loss attributable to noncontrolling interest |
4 |
4 |
||
Adjusted income from continuing operations attributable to CVS Caremark |
$ 3,727 |
$ 3,780 |
||
Weighted average diluted common shares outstanding |
1,345 |
1,345 |
||
Adjusted earnings per share from continuing operations attributable to CVS Caremark |
$ 2.77 |
$ 2.81 |
||
Free Cash Flow Guidance |
|
(Unaudited) |
|
The following reconciliation of net cash provided by operating activities to free cash flow contains forward-looking information that is subject to risks and uncertainties that could cause actual results to differ materially. 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 year ended December 31, 2010 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q. For internal comparisons, management finds it useful to assess year-to-year cash flow performance by adjusting cash provided by operating activities, by capital expenditures and proceeds from sale-leaseback transactions. |
|
Year Ending |
||||
In millions |
December 31, 2011 |
|||
Net cash provided by operating activities |
$ 5,500 |
$ 5,600 |
||
Subtract: Additions to property and equipment |
(2,075) |
(1,950) |
||
Add: Proceeds from sale-leaseback transactions |
600 |
575 |
||
Free cash flow |
$ 4,025 |
$ 4,225 |
||
SOURCE CVS Caremark Corporation
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