WOONSOCKET, R.I., Aug. 4, 2015 /PRNewswire/ --
Second Quarter Year-over-year Highlights:
- Net revenues increased 7.4% to $37.2
billion
- Operating profit increased 2.5% to $2.3 billion
- Adjusted EPS of $1.19 and GAAP
diluted EPS of $1.12, both include
3 cents of acquisition-related
transaction and financing costs
- Adjusted EPS increased 7.7% to $1.22, excluding the 3
cents of acquisition-related transaction and financing
costs
Year-to-date Highlights:
- Generated free cash flow of approximately $2.1 billion
- Cash flow from operations of approximately $3.0 billion
2015 Guidance Narrowed:
- Full year Adjusted EPS of $5.11 to
$5.18, excluding any acquisition-related transaction and
financing costs; GAAP diluted EPS of $4.64
to $4.71; both include the effect of the
previously-announced reduction in 2015 share repurchases
- Provided third quarter Adjusted EPS guidance of $1.27 to $1.30 excluding any acquisition-related
transaction and financing costs; GAAP diluted EPS guidance of
$1.13 to $1.16
- Confirmed full year free cash flow of $5.9 to $6.2 billion; cash flow from operations
of $7.6 to $7.9 billion
CVS Health Corporation (NYSE: CVS) today announced operating
results for the three months ended June 30, 2015.
Revenues
Net revenues for the three months ended June 30, 2015,
increased 7.4%, or $2.6 billion, to
$37.2 billion compared to the three
months ended June 30, 2014.
Revenues in the Pharmacy Services Segment increased 11.9%, or
$2.6 billion, to $24.4 billion in the three months ended
June 30, 2015. The increase was primarily driven by growth in
specialty pharmacy and pharmacy network claims. Pharmacy network
claims processed during the three months ended June 30, 2015,
increased 8.7% to approximately 229 million compared to 210 million
in the prior year. The increase in the pharmacy network claim
volume was primarily due to net new business as well as growth in
Managed Medicaid. Mail choice claims processed during the three
months ended June 30, 2015, increased 3.9% to 21.3 million,
compared to 20.5 million in the prior year. The increase in mail
choice claims was driven by specialty claim volume and increased
claims associated with the continued adoption of our Maintenance
Choice® offerings.
Revenues in the Retail Pharmacy Segment increased 2.2%, or
$371 million, to $17.2 billion in the three months ended
June 30, 2015. Same store sales increased 0.5% versus the
second quarter of last year, with pharmacy same store sales up 4.1%
and front store same store sales down 7.8%. On a comparable basis,
front store same store sales would have been approximately 780
basis points higher if tobacco and the estimated associated basket
sales were excluded from the three months ended June 30, 2014. Front store same store sales were
impacted by softer customer traffic, partially offset by an
increase in basket size. Pharmacy same store prescription volumes
rose 4.8% on a 30-day equivalent basis. Pharmacy same store sales
were negatively impacted by approximately 370 basis points from
recent generic drug introductions and by approximately 80 basis
points from the implementation of Specialty Connect®.
The implementation of Specialty Connect had a greater effect on
revenues than prescription volumes due to the higher dollar value
of specialty products.
For the three months ended June 30, 2015, the generic
dispensing rate increased approximately 150 basis points from the
prior year in both segments, rising to 83.9% in the Pharmacy
Services Segment and 85.0% in the Retail Pharmacy Segment.
Operating Profit and Net Income
Operating profit for the Pharmacy Services Segment increased
7.1% and for the Retail Pharmacy Segment declined 1.4% for the
three months ended June 30, 2015.
Both segments benefited from the impact of increased generic drugs
dispensed and favorable purchasing economics. The Pharmacy Services
Segment was also positively impacted by growth in specialty
pharmacy and pharmacy network volume, partially offset by price
compression. The Retail Pharmacy Segment was negatively impacted by
continued reimbursement pressure, partially offset by increased
sales and an improved front store margin rate, largely driven by
the removal of tobacco products and changes in product mix. The
Corporate Segment includes $21
million of acquisition-related transaction costs for the
three months ended June 30, 2015
related to the proposed acquisitions of Omnicare, Inc. ("Omnicare")
and the pharmacies and clinics of Target Corporation ("Target").
The acquisition of Omnicare is expected to close prior to the end
of 2015, potentially as early as the third quarter. The close of
the acquisition of the pharmacies and clinics of Target is
uncertain and could occur in either 2015 or 2016.
Net income for the three months ended June 30, 2015,
increased 2.1%, or $26 million, to
$1.3 billion, compared with
approximately $1.2 billion during the
three months ended June 30, 2014. In
addition to the $21 million of
transaction costs discussed above, net income for the three months
ended June 30, 2015 also included
$36 million of pre-tax
acquisition-related financing costs related to the proposed
Omnicare and Target acquisitions (combined impact of approximately
$0.03 per diluted share). Excluding
the acquisition-related transaction and financing costs, net income
increased 4.9%(1). Adjusted earnings per share (Adjusted
EPS) for the three months ended June 30, 2015 and 2014, was
$1.19 and $1.13, respectively. Excluding the
acquisition-related transaction and financing costs, Adjusted EPS
increased 7.7% to $1.22. Adjusted EPS
in the three months ended June 30,
excludes $131 million and
$133 million in 2015 and 2014,
respectively, of intangible asset amortization related to
acquisition activity. GAAP earnings per share for the three months
ended June 30, 2015 and 2014, was $1.12 and $1.06,
respectively, an increase of 5.3%, which includes the
acquisition-related transaction and financing costs.
President and Chief Executive Officer Larry Merlo stated, "I'm very pleased to report
second quarter results that exceeded our expectations. On an
underlying basis, we surpassed the high end of our guidance range
by two cents, as operating
profit in the retail business exceeded our expectations while
operating profit in the PBM was in line with our guidance. We
have also generated more than $2.1
billion in free cash flow in the first half of 2015, putting
us well on our way to return more than $6
billion to shareholders through dividends and share
repurchases this year."
Mr. Merlo continued, "Additionally, I'm pleased to report that
we're having a highly successful 2016 PBM selling season and have
won significant net new business. Our unmatched suite of assets is
enabling us to bring innovative, channel-agnostic products and
services to the marketplace. In this era of consumer-directed
health care, our assets have uniquely positioned us to provide
patients with greater choice as to how they receive their pharmacy
care while driving positive impacts on adherence through
face-to-face interactions. This should result in lower overall
health care costs providing savings for clients as well as better
health outcomes and convenience for patients."
Guidance
Given the strong performance this quarter, along with the
previously-announced acquisition-related decision to reduce this
year's share repurchases by $1
billion, the Company narrowed guidance for the full year
2015 and now expects to deliver Adjusted EPS of $5.11 to $5.18, from $5.08
to $5.19 and GAAP diluted EPS of $4.64 to $4.71, from $4.80
to $4.91. This Adjusted EPS guidance excludes the impact of
acquisition-related transaction and financing costs that have been
recorded ($21 million of transaction
costs and $36 million of financing
costs for the three and six months ended June 30, 2015, or approximately $0.03 per share), and any additional costs that
would be recorded if the proposed acquisitions of Omnicare and the
pharmacies and clinics of Target close prior to the end of
2015. The Company continues to expect to deliver 2015 free
cash flow of $5.9 billion to $6.2
billion, and 2015 cash flow from operations of $7.6 billion to $7.9 billion. For the third
quarter of 2015, the Company expects to deliver Adjusted EPS of
$1.27 to $1.30, excluding any
acquisition-related transaction and financing costs, and GAAP
diluted EPS of $1.13 to $1.16.
Real Estate Program
During the three months ended June 30, 2015, the Company
opened 25 new retail drugstores and closed 5 retail drugstores and
one branch for infusion and enteral services. In addition, the
Company relocated 16 retail drugstores. As of June 30, 2015,
the Company operated 8,028 locations in 47 states, the District of Columbia, Puerto Rico and Brazil. These locations included 7,870 retail
drugstores, 18 onsite pharmacies, 24 retail specialty pharmacy
stores, 11 specialty mail order pharmacies, four mail service
dispensing pharmacies, and 85 branches for infusion and enteral
services, including approximately 72 ambulatory infusion suites and
six centers of excellence.
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 Health website at
http://investors.cvshealth.com. This webcast will be archived and
available on the website for a one-year period following the
conference call.
About the Company
CVS Health is a pharmacy innovation company helping people on
their path to better health. Through its more than 7,800 retail
drugstores, nearly 1,000 walk-in medical clinics, a leading
pharmacy benefits manager with more than 70 million plan members,
and expanding specialty pharmacy services, the Company enables
people, businesses and communities to manage health in more
affordable, effective ways. This unique integrated model increases
access to quality care, delivers better health outcomes and lowers
overall health care costs. Find more information about how CVS
Health is shaping the future of health at www.cvshealth.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. By their nature, all
forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by the
forward-looking statements for a number of reasons as described in
our Securities and Exchange Commission filings, including those set
forth in the Risk Factors section and under the section entitled
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K and Quarterly
Report on Form 10-Q.
|
|
(1)
|
Excluding $21 million
of pre-tax ($13 million after-tax) acquisition-related transaction
costs and $36 million of pre-tax ($22 million after-tax)
acquisition-related financing costs for the three months ended June
30, 2015, net income increased $61 million or 4.9% from $1,246
million for the three months ended June 30, 2014 to $1,307 million
for the three months ended June 30, 2015.
|
|
|
— Tables Follow —
CVS HEALTH
CORPORATION
Condensed
Consolidated Statements of Income
(Unaudited)
|
|
|
|
Three Months Ended
June
30,
|
|
Six
Months Ended
June 30,
|
In millions, except per share amounts
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
37,169
|
|
|
$
|
34,602
|
|
|
$
|
73,501
|
|
|
$
|
67,291
|
|
Cost of
revenues
|
|
30,767
|
|
|
28,278
|
|
|
60,935
|
|
|
55,025
|
|
Gross
profit
|
|
6,402
|
|
|
6,324
|
|
|
12,566
|
|
|
12,266
|
|
Operating
expenses
|
|
4,140
|
|
|
4,116
|
|
|
8,172
|
|
|
8,034
|
|
Operating
profit
|
|
2,262
|
|
|
2,208
|
|
|
4,394
|
|
|
4,232
|
|
Interest expense,
net
|
|
166
|
|
|
158
|
|
|
300
|
|
|
316
|
|
Income before income
tax provision
|
|
2,096
|
|
|
2,050
|
|
|
4,094
|
|
|
3,916
|
|
Income tax
provision
|
|
824
|
|
|
804
|
|
|
1,601
|
|
|
1,541
|
|
Net income
|
|
$
|
1,272
|
|
|
$
|
1,246
|
|
|
$
|
2,493
|
|
|
$
|
2,375
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.13
|
|
|
$
|
1.07
|
|
|
$
|
2.20
|
|
|
$
|
2.03
|
|
Diluted
|
|
$
|
1.12
|
|
|
$
|
1.06
|
|
|
$
|
2.19
|
|
|
$
|
2.01
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
1,124
|
|
|
1,165
|
|
|
1,126
|
|
|
1,172
|
|
Diluted
|
|
1,132
|
|
|
1,174
|
|
|
1,134
|
|
|
1,182
|
|
Dividends declared
per share
|
|
$
|
0.350
|
|
|
$
|
0.275
|
|
|
$
|
0.700
|
|
|
$
|
0.550
|
|
CVS HEALTH
CORPORATION
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
|
|
June
30,
|
|
December
31,
|
In millions, except per share amounts
|
|
2015
|
|
2014
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,244
|
|
|
$
|
2,481
|
|
Short-term
investments
|
|
160
|
|
|
34
|
|
Accounts receivable,
net
|
|
10,892
|
|
|
9,687
|
|
Inventories
|
|
12,384
|
|
|
11,930
|
|
Deferred income
taxes
|
|
989
|
|
|
985
|
|
Other current
assets
|
|
732
|
|
|
866
|
|
Total current
assets
|
|
26,401
|
|
|
25,983
|
|
Property and
equipment, net
|
|
9,019
|
|
|
8,843
|
|
Goodwill
|
|
28,122
|
|
|
28,142
|
|
Intangible assets,
net
|
|
9,683
|
|
|
9,774
|
|
Other
assets
|
|
1,443
|
|
|
1,445
|
|
Total
assets
|
|
$
|
74,668
|
|
|
$
|
74,187
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
6,370
|
|
|
$
|
6,547
|
|
Claims and discounts
payable
|
|
6,961
|
|
|
5,404
|
|
Accrued
expenses
|
|
5,543
|
|
|
5,816
|
|
Short-term
debt
|
|
1,488
|
|
|
685
|
|
Current portion of
long-term debt
|
|
24
|
|
|
575
|
|
Total current
liabilities
|
|
20,386
|
|
|
19,027
|
|
Long-term
debt
|
|
11,633
|
|
|
11,630
|
|
Deferred income
taxes
|
|
4,026
|
|
|
4,036
|
|
Other long-term
liabilities
|
|
1,490
|
|
|
1,531
|
|
Commitments and
contingencies
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
CVS Health
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; 1,697 shares issued and
1,118
|
|
|
|
|
shares outstanding at
June 30, 2015 and 1,691 shares issued and 1,140 shares
|
|
|
|
|
outstanding at
December 31, 2014
|
|
17
|
|
|
17
|
|
Treasury stock, at
cost: 578 shares at June 30, 2015 and 550 shares at
December 31, 2014
|
|
(26,988)
|
|
|
(24,078)
|
|
Shares held in trust:
1 share at June 30, 2015 and December 31, 2014
|
|
(31)
|
|
|
(31)
|
|
Capital
surplus
|
|
30,840
|
|
|
30,418
|
|
Retained
earnings
|
|
33,544
|
|
|
31,849
|
|
Accumulated other
comprehensive income (loss)
|
|
(255)
|
|
|
(217)
|
|
Total CVS Health
shareholders' equity
|
|
37,127
|
|
|
37,958
|
|
Noncontrolling
interest
|
|
6
|
|
|
5
|
|
Total shareholders'
equity
|
|
37,133
|
|
|
37,963
|
|
Total liabilities and
shareholders' equity
|
|
$
|
74,668
|
|
|
$
|
74,187
|
|
CVS HEALTH
CORPORATION
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Six
Months Ended
June
30,
|
In millions
|
|
2015
|
|
2014
|
Cash flows from
operating activities:
|
|
|
|
|
Cash receipts from
customers
|
|
$
|
71,014
|
|
|
$
|
62,932
|
|
Cash paid for
inventory and prescriptions dispensed by retail network
pharmacies
|
|
(58,129)
|
|
|
(50,268)
|
|
Cash paid to other
suppliers and employees
|
|
(7,935)
|
|
|
(7,787)
|
|
Interest
received
|
|
9
|
|
|
6
|
|
Interest
paid
|
|
(311)
|
|
|
(331)
|
|
Income taxes
paid
|
|
(1,627)
|
|
|
(1,483)
|
|
Net cash provided by
operating activities
|
|
3,021
|
|
|
3,069
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of property
and equipment
|
|
(942)
|
|
|
(891)
|
|
Proceeds from
sale-leaseback transactions
|
|
34
|
|
|
5
|
|
Proceeds from sale of
property and equipment and other assets
|
|
14
|
|
|
7
|
|
Acquisitions (net of
cash acquired) and other investments
|
|
(112)
|
|
|
(2,248)
|
|
Purchase of
available-for-sale investments
|
|
(124)
|
|
|
(161)
|
|
Sale or maturity of
available-for-sale investments
|
|
40
|
|
|
103
|
|
Net cash used in
investing activities
|
|
(1,090)
|
|
|
(3,185)
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Increase in
short-term debt
|
|
803
|
|
|
—
|
|
Repayments of
long-term debt
|
|
(550)
|
|
|
(41)
|
|
Dividends
paid
|
|
(794)
|
|
|
(647)
|
|
Proceeds from
exercise of stock options
|
|
211
|
|
|
266
|
|
Excess tax benefits
from stock-based compensation
|
|
97
|
|
|
65
|
|
Repurchase of common
stock
|
|
(2,934)
|
|
|
(2,001)
|
|
Net cash used in
financing activities
|
|
(3,167)
|
|
|
(2,358)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
(1)
|
|
|
(3)
|
|
Net decrease in cash
and cash equivalents
|
|
(1,237)
|
|
|
(2,477)
|
|
Cash and cash
equivalents at the beginning of the period
|
|
2,481
|
|
|
4,089
|
|
Cash and cash
equivalents at the end of the period
|
|
$
|
1,244
|
|
|
$
|
1,612
|
|
|
|
|
|
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
|
Net income
|
|
$
|
2,493
|
|
|
$
|
2,375
|
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
978
|
|
|
965
|
|
Stock-based
compensation
|
|
88
|
|
|
77
|
|
Deferred income taxes
and other non-cash items
|
|
6
|
|
|
44
|
|
Change in operating
assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
Accounts receivable,
net
|
|
(1,211)
|
|
|
(584)
|
|
Inventories
|
|
(465)
|
|
|
(235)
|
|
Other current
assets
|
|
131
|
|
|
(74)
|
|
Other
assets
|
|
(48)
|
|
|
(23)
|
|
Accounts payable and
claims and discounts payable
|
|
1,383
|
|
|
521
|
|
Accrued
expenses
|
|
(241)
|
|
|
33
|
|
Other long-term
liabilities
|
|
(93)
|
|
|
(30)
|
|
Net cash provided by
operating activities
|
|
$
|
3,021
|
|
|
$
|
3,069
|
|
Adjusted Earnings
Per Share
(Unaudited)
|
|
For internal
comparisons, management finds it useful to assess year-over-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 and other,
which is comprised of earnings allocated to participating
securities, divided by the weighted average diluted shares
outstanding.
|
|
The following is a
reconciliation of income before income tax provision to adjusted
earnings per share:
|
|
|
|
Three Months Ended
June
30,
|
|
Six
Months Ended
June 30,
|
In millions, except per share amounts
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Income before income
tax provision(1)
|
|
$
|
2,096
|
|
|
$
|
2,050
|
|
|
$
|
4,094
|
|
|
$
|
3,916
|
|
Amortization
|
|
131
|
|
|
133
|
|
|
260
|
|
|
264
|
|
Adjusted income
before income tax provision
|
|
2,227
|
|
|
2,183
|
|
|
4,354
|
|
|
4,180
|
|
Adjusted income tax
provision and other(2)
|
|
882
|
|
|
856
|
|
|
1,714
|
|
|
1,645
|
|
Adjusted net
income
|
|
$
|
1,345
|
|
|
$
|
1,327
|
|
|
$
|
2,640
|
|
|
$
|
2,535
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
1,132
|
|
|
1,174
|
|
|
1,134
|
|
|
1,182
|
|
Adjusted earnings per
share
|
|
$
|
1.19
|
|
|
$
|
1.13
|
|
|
$
|
2.33
|
|
|
$
|
2.15
|
|
Adjustments for
acquisition-related costs:
|
|
|
|
|
|
|
|
|
Add back: Per share
acquisition-related transaction costs recorded during the three and
six months ended June 30, 2015(1)
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Add back: Per share
acquisition-related financing costs recorded during the three and
six months ended June 30, 2015(1)
|
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
Adjusted earnings per
share (excluding acquisition-related transaction and financing
costs)
|
|
$
|
1.22
|
|
|
$
|
1.13
|
|
|
$
|
2.36
|
|
|
$
|
2.15
|
|
|
|
(1)
|
Includes $21 million
of acquisition-related transaction costs and $36 million of
acquisition-related financing costs (for a total impact of
approximately $0.03 per diluted share) during the three and six
months ended June 30, 2015 related to the proposed acquisitions of
Omnicare Inc. and the pharmacies and clinics of Target Corporation.
Excluding these items, Adjusted EPS for the three and six months
ended June 30, 2015 was $1.22 and $2.36, respectively, an increase
of 7.7% and 9.9%, respectively, from the prior year.
|
(2)
|
The adjusted income
tax provision is computed using the effective income tax rate
computed from the condensed consolidated statement of income.
"Other" includes earnings allocated to participating securities of
$7 million and $12 million for the three and six months ended
June 30, 2015, 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:
|
|
|
|
Six
Months Ended
June
30,
|
In millions
|
|
2015
|
|
2014
|
|
|
|
|
|
Net cash provided by
operating activities(1)
|
|
$
|
3,021
|
|
|
$
|
3,069
|
|
Subtract: Additions
to property and equipment
|
|
(942)
|
|
|
(891)
|
|
Add: Proceeds from
sale-leaseback transactions
|
|
34
|
|
|
5
|
|
Free cash
flow
|
|
$
|
2,113
|
|
|
$
|
2,183
|
|
|
|
(1)
|
Cash provided by
operating activities for the six months ended June 30, 2015
includes $21 million of pre-tax acquisition-related transaction
costs ($13 million after-tax).
|
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 condensed consolidated financial
statements:
|
|
In millions
|
|
Pharmacy
Services
Segment(1)
|
|
Retail
Pharmacy
Segment
|
|
Corporate
Segment
|
|
Intersegment
Eliminations(2)
|
|
Consolidated
Totals
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015:
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
24,442
|
|
|
$
|
17,242
|
|
|
$
|
—
|
|
|
$
|
(4,515)
|
|
|
$
|
37,169
|
|
Gross
profit
|
|
1,241
|
|
|
5,322
|
|
|
—
|
|
|
(161)
|
|
|
6,402
|
|
Operating profit
(loss)(3)
|
|
940
|
|
|
1,681
|
|
|
(215)
|
|
|
(144)
|
|
|
2,262
|
|
June 30,
2014:
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
21,836
|
|
|
16,871
|
|
|
—
|
|
|
(4,105)
|
|
|
34,602
|
|
Gross
profit
|
|
1,195
|
|
|
5,299
|
|
|
—
|
|
|
(170)
|
|
|
6,324
|
|
Operating profit
(loss)
|
|
878
|
|
|
1,705
|
|
|
(205)
|
|
|
(170)
|
|
|
2,208
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015:
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
48,321
|
|
|
34,193
|
|
|
—
|
|
|
(9,013)
|
|
|
73,501
|
|
Gross
profit
|
|
2,267
|
|
|
10,617
|
|
|
—
|
|
|
(318)
|
|
|
12,566
|
|
Operating profit
(loss)(3)
|
|
1,675
|
|
|
3,408
|
|
|
(404)
|
|
|
(285)
|
|
|
4,394
|
|
June 30,
2014:
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
42,031
|
|
|
33,351
|
|
|
—
|
|
|
(8,091)
|
|
|
67,291
|
|
Gross
profit
|
|
2,129
|
|
|
10,483
|
|
|
—
|
|
|
(346)
|
|
|
12,266
|
|
Operating profit
(loss)
|
|
1,518
|
|
|
3,455
|
|
|
(395)
|
|
|
(346)
|
|
|
4,232
|
|
|
|
(1)
|
Net revenues of the
Pharmacy Services Segment include approximately $2.2 billion and
$2.0 billion of retail co-payments for the three months ended
June 30, 2015 and 2014, respectively, as well as $4.7 billion
and $4.2 billion of retail co-payments for the six months ended
June 30, 2015 and 2014, 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 stand-alone 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. The
following amounts are eliminated in consolidation in connection
with the intersegment activity described in item (ii) above: net
revenues of $1.2 billion for both the three months ended
June 30, 2015 and 2014, and $2.4 billion and $2.3 billion for
the six months ended June 30, 2015 and 2014, respectively;
gross profit of $161 million and $170 million for the three months
ended June 30, 2015 and 2014, respectively, and $318 million
and $346 million for the six months ended June 30, 2015 and 2014,
respectively; and operating profit of $144 million and $170 million
for the three months ended June 30, 2015 and 2014,
respectively, and $285 million and $346 million for the six months
ended June 30, 2015 and 2014, respectively.
|
(3)
|
The Corporate Segment
operating loss includes $21 million of acquisition-related
transaction costs for the three and six months ended June 30,
2015.
|
Supplemental
Information
(Unaudited)
|
|
Pharmacy Services
Segment
|
|
The following table
summarizes the Pharmacy Services Segment's performance for the
respective periods:
|
|
|
|
Three Months Ended
June
30,
|
|
Six
Months Ended
June 30,
|
In millions
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
24,442
|
|
|
$
|
21,836
|
|
|
$
|
48,321
|
|
|
$
|
42,031
|
|
Gross
profit
|
|
1,241
|
|
|
1,195
|
|
|
2,267
|
|
|
2,129
|
|
Gross profit % of net
revenues
|
|
5.1
|
%
|
|
5.5
|
%
|
|
4.7
|
%
|
|
5.1
|
%
|
Operating
expenses
|
|
301
|
|
|
317
|
|
|
592
|
|
|
611
|
|
Operating expense %
of net revenues
|
|
1.2
|
%
|
|
1.5
|
%
|
|
1.2
|
%
|
|
1.5
|
%
|
Operating
profit
|
|
940
|
|
|
878
|
|
|
1,675
|
|
|
1,518
|
|
Operating profit % of
net revenues
|
|
3.8
|
%
|
|
4.0
|
%
|
|
3.5
|
%
|
|
3.6
|
%
|
Net
revenues(1):
|
|
|
|
|
|
|
|
|
Mail
choice(2)
|
|
$
|
9,107
|
|
|
$
|
7,753
|
|
|
$
|
17,857
|
|
|
$
|
14,587
|
|
Pharmacy
network(3)
|
|
15,267
|
|
|
14,025
|
|
|
30,326
|
|
|
27,327
|
|
Other
|
|
68
|
|
|
58
|
|
|
138
|
|
|
117
|
|
Pharmacy claims
processed(1):
|
|
|
|
|
|
|
|
|
Total
|
|
250.1
|
|
|
230.9
|
|
|
501.3
|
|
|
458.7
|
|
Mail
choice(2)
|
|
21.3
|
|
|
20.5
|
|
|
41.7
|
|
|
40.3
|
|
Pharmacy
network(3)
|
|
228.8
|
|
|
210.4
|
|
|
459.6
|
|
|
418.4
|
|
Generic dispensing
rate(1):
|
|
|
|
|
|
|
|
|
Total
|
|
83.9
|
%
|
|
82.4
|
%
|
|
83.7
|
%
|
|
82.0
|
%
|
Mail
choice(2)
|
|
76.3
|
%
|
|
74.6
|
%
|
|
76.2
|
%
|
|
72.5
|
%
|
Pharmacy
network(3)
|
|
84.6
|
%
|
|
83.2
|
%
|
|
84.4
|
%
|
|
83.0
|
%
|
Mail choice
penetration rate
|
|
20.7
|
%
|
|
21.6
|
%
|
|
20.2
|
%
|
|
21.4
|
%
|
|
|
(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.
|
Supplemental
Information
(Unaudited)
|
|
Retail Pharmacy
Segment
|
|
The following table
summarizes the Retail Pharmacy Segment's performance for the
respective periods:
|
|
|
|
Three Months Ended
June 30,
|
|
Six
Months Ended
June 30,
|
In millions
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
17,242
|
|
$
|
16,871
|
|
$
|
34,193
|
|
$
|
33,351
|
Gross
profit
|
|
5,322
|
|
5,299
|
|
10,617
|
|
10,483
|
Gross profit % of net
revenues
|
|
30.9%
|
|
31.4%
|
|
31.0%
|
|
31.4%
|
Operating
expenses
|
|
3,641
|
|
3,594
|
|
7,209
|
|
7,028
|
Operating expense %
of net revenues
|
|
21.1%
|
|
21.3%
|
|
21.1%
|
|
21.1%
|
Operating
profit
|
|
1,681
|
|
1,705
|
|
3,408
|
|
3,455
|
Operating profit % of
net revenues
|
|
9.7%
|
|
10.1%
|
|
10.0%
|
|
10.4%
|
Retail prescriptions
filled (90 Day = 3 Rx) (1)
|
|
244.1
|
|
230.3
|
|
485.5
|
|
457.4
|
Net revenue increase
(decrease):
|
|
|
|
|
|
|
|
|
Total
|
|
2.2%
|
|
4.5%
|
|
2.5%
|
|
3.6%
|
Pharmacy
|
|
5.2%
|
|
5.4%
|
|
5.2%
|
|
4.8%
|
Front
store
|
|
(5.1)%
|
|
1.1%
|
|
(4.4)%
|
|
(0.6)%
|
Total prescription
volume (90 Day = 3 Rx) (1)
|
|
6.0%
|
|
4.8%
|
|
6.1%
|
|
3.8%
|
Same store increase
(decrease)(2):
|
|
|
|
|
|
|
|
|
Total
sales
|
|
0.5%
|
|
3.3%
|
|
0.8%
|
|
2.4%
|
Pharmacy
sales
|
|
4.1%
|
|
5.0%
|
|
4.2%
|
|
4.4%
|
Front store
sales(3)
|
|
(7.8)%
|
|
(0.4)%
|
|
(7.0)%
|
|
(2.1)%
|
Prescription volume
(90 Day = 3 Rx) (1)
|
|
4.8%
|
|
3.9%
|
|
4.9%
|
|
3.0%
|
Generic dispensing
rate
|
|
85.0%
|
|
83.5%
|
|
84.7%
|
|
83.2%
|
Pharmacy % of total
revenues
|
|
71.6%
|
|
69.6%
|
|
71.6%
|
|
69.8%
|
Third party % of
pharmacy revenue
|
|
98.8%
|
|
98.7%
|
|
98.7%
|
|
98.5%
|
|
|
(1)
|
Includes the
adjustment to convert 90-day, non-specialty prescriptions to the
equivalent of three 30-day prescriptions. This adjustment reflects
the fact that these prescriptions include approximately three times
the amount of product days supplied compared to a normal
prescription.
|
(2)
|
Same store sales
exclude revenues from MinuteClinic and stores in Brazil.
|
(3)
|
On a comparable
basis, front store same store sales would have been approximately
780 and 790 basis points higher for the three and six months ended
June 30, 2015, respectively, if tobacco and the estimated
associated basket sales were excluded from the three and six months
ended June 30, 2014.
|
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. All forward-looking information involves risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking information for a number of
reasons as described in our Securities and Exchange Commission
filings, including those set forth in the Risk Factors section and
under the section entitled "Cautionary Statement Concerning
Forward-Looking Statements" in our most recently filed Annual
Report on Form 10-K and Quarterly Report on Form 10-Q. For internal
comparisons, management finds it useful to assess year-over-year
performance by adjusting diluted earnings per share for
amortization, which primarily relates to acquisition
activities.
|
|
In millions, except per share amounts
|
|
Year
Ending
December 31, 2015
|
|
|
|
|
|
Income before income
tax provision(2)(3)(4)
|
|
$
|
8,638
|
|
|
$
|
8,776
|
|
Amortization
|
|
522
|
|
|
521
|
|
Adjusted income
before income tax provision
|
|
9,160
|
|
|
9,297
|
|
Adjusted income tax
provision and other(1)
|
|
3,622
|
|
|
3,676
|
|
Adjusted net
income
|
|
$
|
5,538
|
|
|
$
|
5,621
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
1,126
|
|
|
1,126
|
|
Adjusted earnings per
share
|
|
$
|
4.92
|
|
|
$
|
4.99
|
|
Adjustments for
acquisition-related costs:
|
|
|
|
|
Add back: Per share
acquisition-related transaction and financing costs recorded during
the six months ended June 30, 2015(2)
|
|
0.03
|
|
|
0.03
|
|
Add back: Per share
acquisition-related transaction and financing costs estimated from
July 1, 2015 to December 31, 2015(3)(4)
|
|
0.16
|
|
|
0.16
|
|
Adjusted earnings per
share (excluding acquisition-related transaction and financing
costs)
|
|
$
|
5.11
|
|
|
$
|
5.18
|
|
|
In millions, except per share amounts
|
|
Three Months
Ending
September 30, 2015
|
|
|
|
|
|
Income before income
tax provision
|
|
$
|
2,103
|
|
|
$
|
2,165
|
|
Amortization
|
|
131
|
|
|
131
|
|
Adjusted income
before income tax provision
|
|
2,234
|
|
|
2,296
|
|
Adjusted income tax
provision and other(1)
|
|
889
|
|
|
914
|
|
Adjusted net
income
|
|
$
|
1,345
|
|
|
$
|
1,382
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
1,122
|
|
|
1,122
|
|
Adjusted earnings per
share
|
|
$
|
1.20
|
|
|
$
|
1.23
|
|
Adjustments for
acquisition-related costs:
|
|
|
|
|
Add back: Financing
costs estimated for the third quarter(5)
|
|
0.07
|
|
|
0.07
|
|
Adjusted earnings per
share (excluding acquisition-related financing costs)
|
|
$
|
1.27
|
|
|
$
|
1.30
|
|
|
|
(1)
|
The adjusted income
tax provision is computed using the effective income tax rate from
the consolidated statement of income. Other includes earnings
allocated to participating securities.
|
(2)
|
During the three and
six months ended June 30, 2015, the Company recorded $21 million of
acquisition-related transaction costs and $36 million of
acquisition-related financing costs related to the proposed
acquisitions of Omnicare, Inc. and the pharmacies and clinics of
Target Corporation. The total impact of these costs was
approximately $0.03 per share.
|
(3)
|
The
acquisition-related transaction costs for the proposed acquisition
of Omnicare, Inc. for the period from July 1, 2015 through December
31, 2015 are estimated to be $0.03 per share. Depending on the
timing of the close of the proposed acquisition of the pharmacies
and clinics of Target Corporation, there could be another $0.02 of
transaction costs.
|
(4)
|
The
acquisition-related financing costs for the period from July 1,
2015 to December 31, 2015 are estimated to be $0.13 per
share.
|
(5)
|
The
acquisition-related financing costs for the three months ending
September 30, 2015 are estimated to be $0.07 per share.
|
Free Cash Flow
Guidance
(Unaudited)
|
|
The following
reconciliation of net cash provided by operating activities to free
cash flow contains forward-looking information. All forward-looking
information involves risks and uncertainties. Actual results may
differ materially from those contemplated by the forward-looking
information for a number of reasons as described in our Securities
and Exchange Commission filings, including those set forth in the
Risk Factors section and under the section entitled "Cautionary
Statement Concerning Forward-Looking Statements" in our most
recently filed Annual Report on Form 10-K and Quarterly Report on
Form 10-Q. For internal comparisons, management finds it useful to
assess year-over-year cash flow performance by adjusting cash
provided by operating activities, by capital expenditures and
proceeds from sale-leaseback transactions.
|
|
In millions
|
|
Year
Ending
December 31, 2015
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
7,550
|
|
|
$
|
7,949
|
|
Subtract: Additions
to property and
equipment
|
|
(2,300)
|
|
|
(2,200)
|
|
Add: Proceeds from
sale-leaseback transactions
|
|
600
|
|
|
500
|
|
Free cash
flow
|
|
$
|
5,850
|
|
|
$
|
6,249
|
|
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SOURCE CVS Health Corporation