WOONSOCKET, R.I., Feb. 3, 2011 /PRNewswire via COMTEX/ -- CVS Caremark Corporation (NYSE: CVS) today announced results for the fourth quarter and year ended December 31, 2010.
Fourth Quarter Year-Over-Year Highlights:
- Adjusted diluted EPS from continuing operations of $0.80
- GAAP diluted EPS from continuing operations of $0.75
- Same store sales increased 1.7%
Full Year Highlights:
- Generated free cash flow of $3.3 billion, up 7.6%
- Generated cash flow from operations of $4.8 billion, up 18.4%
- Adjusted diluted EPS from continuing operations of $2.69
- GAAP diluted EPS from continuing operations of $2.50
- Same store sales increased 2.1%
- Free cash flow expected to be between $4.0 and $4.2 billion
- Cash flow from operations expected to be between $5.5 and $5.7 billion
- Adjusted diluted EPS from continuing operations expected to be in the range of $2.72 - $2.82
- GAAP diluted EPS from continuing operations expected to be in the range of $2.52 - $2.62
- $2.0 billion share repurchase authorization expected to be completed
- Quarterly dividend increase of 43% announced in January
Net revenues for the three months ended December 31, 2010, decreased 4.1% or $1.0 billion to $24.8 billion, down from $25.8 billion in the three months ended December 31, 2009. For the year ended December 31, 2010, total revenue decreased 2.3% or $2.3 billion to $96.4 billion, compared to $98.7 billion for the year ended December 31, 2009.
Pharmacy Services segment revenues for the three months ended December 31, 2010, decreased 9.7% to $12.2 billion, as compared to the prior year period. Adjusting for the impact of new generics, net revenues would have declined by 2.4% in the Pharmacy Services segment. The decrease in net revenues was primarily due to the previously announced termination of a few large client contracts effective January 1, 2010 as well as the decrease of covered lives under our Medicare Part D program resulting from the 2010 Medicare Part D competitive bidding process. This was partially offset by new client starts effective January1, 2010. For the year ended December 31, 2010, total revenue in the Pharmacy Services segment decreased 6.4% to $47.8 billion, compared to $51.1 billion in the year ended December 31, 2009.
Retail Pharmacy segment revenues for the three months ended December 31, 2010, increased 3.1% to $14.9 billion and same store sales increased 1.7% over the prior year period. Pharmacy same store sales rose 2.0% in the three months ended December 31, 2010 and reflect a positive impact from Maintenance Choice(TM) of approximately 220 basis points on a net basis (i.e., a positive impact of approximately 300 basis points on a gross basis, net of approximately 80 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 250 basis points due to recent generic introductions. Front store same store sales during the three months ended December 31, 2010, increased 1.0%. For the year ended December 31, 2010, total revenue in the Retail Pharmacy segment increased 3.6% to $57.3 billion, compared to $55.4 billion in the year ended December 31, 2009.
The generic dispensing rate increased approximately 390 basis points to 72.8% in our Pharmacy Services segment and 320 basis points to 73.8% in our Retail Pharmacy segment, compared to the three months ended December 31, 2009.
Income from continuing operations attributable to CVS Caremark
Income from continuing operations attributable to CVS Caremark for the three months ended December 31, 2010 decreased $24 million, or 2.3%, to $1,027 million, compared to $1,051 million in the prior year period. Adjusted earnings per share from continuing operations attributable to CVS Caremark, which excludes $108 million of intangible asset amortization for the three months ended December 31, 2010, related to acquisition activity, were $0.80, compared to $0.79 in the prior year period. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for the three months ended December 31, 2010 were $0.75, compared to $0.74 in the prior year period. During the three months ended December 31, 2010, the Company recognized previously unrecognized tax benefits, which were related to the expiration of various statutes of limitations and settlements with tax authorities, which amounted to $0.03 per diluted share, the majority of which was anticipated and included in our previous guidance. During the three months ended December 31, 2009, the Company recognized similar previously unrecognized tax benefits amounting to $0.01 per diluted share.
Income from continuing operations attributable to CVS Caremark for the year ended December 31, 2010 decreased $266 million, or 7.2%, to $3.4 billion, compared to $3.7 billion in the prior year. Adjusted earnings per share from continuing operations attributable to CVS Caremark, which excludes $427 million of intangible asset amortization for the year ended December 31, 2010, related to acquisition activity, were $2.69, compared to $2.74, in the prior year. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for the year ended December 31, 2010 were $2.50, compared to $2.56 in the prior year. The impact of the previously unrecognized tax benefits on the years ended December 31, 2010 and 2009 were $0.03 and $0.12 per diluted share, respectively.
Larry Merlo, President and Chief Operating Officer, said, "I'm pleased with our earnings this quarter, which were in line with our expectations. Our retail business continued to produce industry-leading same store sales and achieved an all-time record operating margin. The PBM business made significant progress last year, with a strong 2011 selling season, high client retention rates, and the introduction of unique products and services that leverage our combined retail and PBM assets.
"We also launched the PBM streamlining initiative, which is expected to generate more than a billion dollars in savings over the next five years," continued Merlo. "Furthermore, we have focused our resources and investments on key strategic growth areas, such as Medicare Part D. I'm very confident about our long-term prospects across the enterprise and committed to ensuring our success as I take the reins as CEO this March."
Real estate program
During the three months ended December 31, 2010, the Company opened 32 new retail drugstores, and closed two retail drugstores. In addition, the Company relocated seven retail drugstores. As of December 31, 2010, the Company operated 7,182 retail drugstores, 44 specialty pharmacy stores, 18 specialty mail order pharmacies and four mail order pharmacies in 44 states, the District of Columbia and Puerto Rico.
CVS Caremark is also providing its initial guidance for 2011 today. The Company expects to generate substantial free cash flow in 2011 of $4.0 billion to $4.2 billion, up from the $3.3 billion in free cash flow generated in 2010. The Company expects to generate cash flow from operations in 2011 of $5.5 billion to $5.7 billion. The Company also expects to deliver adjusted diluted earnings per share from continuing operations of $2.72 to $2.82, and GAAP diluted earnings per share from continuing operations of $2.52 to $2.62 per share in 2011. This guidance includes the benefit of the previously announced acquisition of Universal American's Medicare Part D business assuming a closing date late in the second quarter as well as the costs related to the previously announced Pharmacy Services segment streamlining initiative. The Universal American transaction is subject to customary closing conditions, including regulatory approvals, as well as approval by Universal American shareholders. These estimates assume the completion in 2011 of a $2.0 billion share repurchase program authorized last year by CVS Caremark's Board of Directors. The Company will provide further details on this initial 2011 earnings guidance during today's earnings call.
CVS Caremark previously announced that its Board of Directors had approved an increase in its quarterly dividend of approximately 43%, to $0.125 (12.5cents) per share on the Common Stock of the Company, payable February2, 2011 to holders of record on January21, 2011. This increase translates into an annual rate of 50 cents per share, up 15cents per share from the previous annual rate of 35cents.
Teleconference and webcast
The Company will be holding a conference call today for the investment community at 8:30 am (ET) to discuss its quarterly results and outlook. 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 cvshealth.com. The Company will also be posting slides on its Web site just prior to the start of today's conference call and can be viewed during the call. The webcast and supporting materials 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. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access 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 our more than 7,100 CVS/pharmacy(R) stores that provide unparalleled service and capabilities. Our clinical offerings include our signature Pharmacy Advisor(TM) program as well as innovative generic step therapy and genetic benefit management programs that promote more cost effective and healthier behaviors and improve healthcare outcomes. General information about CVS Caremark is available through the Company's website at cvshealth.com.
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, 2009 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q.
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CVS CAREMARK CORPORATION
Consolidated Statements of Income (Unaudited)