Company reaffirms its 2011 EPS Guidance
WOONSOCKET, R.I., May 5, 2011 /PRNewswire via COMTEX/ -- CVS Caremark Corporation (NYSE: CVS), today announced revenues, operating profit, and net income for the three months ended March 31, 2011.
First Quarter Year-Over-Year Highlights:
- Net revenues increased 8.9% to a record $25.9 billion
- Pharmacy Services segment revenues increased 18.4%
- Retail Pharmacy segment revenues increased 4.4%, with same stores sales up 2.6%
- Adjusted diluted EPS from continuing operations of $0.57
- GAAP diluted EPS from continuing operations of $0.52
- Full-year Adjusted diluted EPS from continuing operations reaffirmed at $2.72 - $2.82
- Full-year GAAP diluted EPS from continuing operations reaffirmed at $2.52 - $2.62
Net revenues for the three months ended March 31, 2011 increased $2.1 billion to a record $25.9 billion, up from $23.8 billion during the three months ended March 31, 2010.
Revenues in the Pharmacy Services segment increased 18.4% to $14.0 billion in the three months ended March 31, 2011. This increase was primarily associated with the addition of the previously announced long-term contract with Aetna. Retail network claims processed during the three months ended March 31, 2011 increased 19.5% to 157.7 million, compared to 132.0 million in the prior year period. The increase in retail network claims was primarily due to the Aetna contract as well as an increase in Medicare Part D prescription drug claims as a result of increases in covered lives. Mail choice claims processed during the three months ended March 31, 2011 increased approximately 13.0% to 17.5 million compared to 15.5 million in the prior year period. The increase in the mail choice claim volume was also driven by the Aetna contract.
Revenues in the Retail Pharmacy segment increased 4.4% to $14.6 billion in the three months ended March 31, 2011. Same store sales increased 2.6% over the prior year period. Pharmacy same store sales rose 3.7%, reflecting a strong flu season as well as a positive impact from Maintenance Choice(TM) of approximately 170 basis points on a net basis (i.e., a positive impact of approximately 220 basis points on a gross basis, net of approximately 50 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 260 basis points due to recent generic introductions. Front store same store sales increased 0.4% in the three months ended March 31, 2011. As expected front store sales were negatively impacted by approximately 45 basis points due to the shift of sales related to the Easter holiday into the second quarter, and by approximately 65 basis points due to the absence of sales associated with the grand reopening of the Longs stores in the prior year.
Income from continuing operations attributable to CVS Caremark:
Income from continuing operations attributable to CVS Caremark for the three months ended March 31, 2011, decreased $59 million to $714 million, compared with $773 million during the three months ended March 31, 2010. The decline in our income from continuing operations was driven by lower gross profit in our Pharmacy Services segment primarily as a result of pricing compression relating to contract renewals, and in particular the renewal of a large government contract that took effect during the third quarter of 2010. Additionally, as expected, our effective income tax rate improved during the quarter to 39.4% compared to 39.8% in the prior year period, primarily due to changes in the effective state tax rates. Adjusted earnings per share from continuing operations attributable to CVS Caremark, which excludes $106 million of intangible asset amortization related to acquisition activity, for the three months ended March 31, 2011 were $0.57, compared with $0.60 in the three months ended March 31, 2010. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for the three months ended March 31, 2011 were $0.52, compared with $0.55 in the three months ended March 31, 2010.
Larry Merlo, President and Chief Executive Officer, stated: "2011 is off to a good start, with results slightly above guidance for both our retail and PBM businesses. We also generated $1.6 billion in free cash this quarter, more than double the amount we generated in last year's first quarter. Our retail business continues to grow and gain share, and our new store clustering initiatives are yielding promising results."
Mr. Merlo continued, "The PBM's 2012 selling season is also off to a good start, and adoption of our integrated offerings is growing. The Aetna implementation and PBM streamlining initiatives are both proceeding well and on schedule. I remain confident in our ability to execute our operating plans and improve the performance of our PBM for 2012 and beyond."
Acquisition of Universal American Medicare Part D Business:
On April 29, 2011, the Company acquired the Medicare prescription drug business of Universal American Corp. (the "UAM Medicare Part D Business"). As previously announced, the Company paid cash consideration of $1.25 billion plus $185 million (the amount of excess capital that resided in the entities that operate the UAM Medicare Part D Business), less $110 million (the amount of Universal American Corp.'s outstanding trust preferred securities which are being assumed by the Company). The UAM Medicare Part D Business offers prescription drug plan benefits to Medicare beneficiaries throughout the United States through its Community CCRx(SM) prescription drug plan. With the inclusion of this acquisition the Company now provides Medicare Part D benefits to over 3 million beneficiaries. The Company continues to expect the acquisition of the UAM Medicare Part D Business to be approximately $0.08 accretive to adjusted diluted earnings per share for the remainder of the year.
Real estate program:
During the three months ended March 31, 2011, the Company opened 57 new retail drugstores, one new retail specialty pharmacy store and closed 13 retail drugstores. In addition, the Company relocated 49 retail drugstores. As of March 31, 2011, the Company operated 7,314 locations, included in which were 7,226 retail drugstores, 66 specialty pharmacy stores, 18 specialty mail order pharmacies and four mail order pharmacies in 44 states, the District of Columbia and Puerto Rico.
In light of the solid performance reported today and continued confidence about the remainder of the year, the Company is reaffirming its earnings per share guidance ranges for the full year 2011. As previously announced, the Company expects adjusted earnings per share from continuing operations to be in the range of $2.72 - $2.82 and GAAP earnings per share from continuing operations to be in the range of $2.52 - $2.62.
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 conference call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Caremark website at cvshealth.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 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 more than 65,000 pharmacies, including over 7,200 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 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, 2010.
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CVS CAREMARK CORPORATION
Condensed Consolidated Statements of Income (Unaudited)