WOONSOCKET, R.I., Aug. 4, 2011 /PRNewswire via COMTEX/ -- CVS Caremark Corporation (NYSE: CVS), today announced revenues, operating profit, and net income for the three months ended June 30, 2011.
Second Quarter Year-Over-Year Highlights:
- Net revenues increased 10.9% to a record $26.6 billion
- Pharmacy Services segment revenues increased 23.2%
- Retail Pharmacy segment revenues increased 3.6%, with same stores sales up 2.0%
- Adjusted EPS from continuing operations of $0.65
- GAAP diluted EPS from continuing operations of $0.60
- Generated free cash flow of $2.4 billion
- Generated cash flow from operations of $3.1 billion
- Company narrows 2011 EPS guidance range
- Full-year adjusted EPS from continuing operations revised to $2.75 - $2.81
- Full-year GAAP diluted EPS from continuing operations revised to $2.55 - $2.61
Net revenues for the three months ended June 30, 2011 increased $2.6 billion to $26.6 billion, up from $24.0 billion during the three months ended June 30, 2010.
Revenues in the Pharmacy Services segment increased 23.2% to $14.6 billion in the three months ended June 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"). Pharmacy network claims processed during the three months ended June 30, 2011 increased 35.6% to 174.0 million, compared to 128.3 million in the prior year period. The increase in pharmacy network claims was primarily due to the Aetna contract, the Company's recent acquisition of the UAM Medicare Part D Business, as well as an increase in covered lives in our existing Medicare Part D Business. Mail Choice claims processed during the three months ended June 30, 2011 increased approximately 11.3% to 17.8 million compared to 16.0 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 3.6% to $14.8 billion in the three months ended June 30, 2011. Same store sales increased 2.0% over the prior year period. Pharmacy same store sales rose 2.6%, and include a positive impact from Maintenance Choice(TM) of approximately 160 basis points on a net basis (i.e., a positive impact of approximately 190 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 170 basis points due to recent generic introductions. Front store same store sales increased 0.8% in the three months ended June 30, 2011. As expected, front store sales were positively impacted by approximately 45 basis points due to the shift of sales related to the Easter holiday into the second quarter.
Income from Continuing Operations Attributable to CVS Caremark
Income from continuing operations attributable to CVS Caremark for the three months ended June 30, 2011, decreased $5 million to $817 million, compared with $822 million during the three months ended June 30, 2010. The decline in income from continuing operations was driven by lower gross profit in the Pharmacy Services segment. This was primarily the 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. As expected, this was partially offset by an improvement in the Company's effective income tax rate during the quarter to 39.2% compared to 39.8% in the prior year period. Adjusted earnings per share from continuing operations attributable to CVS Caremark ("Adjusted EPS") for both the three months ended June 30, 2011 and 2010 was $0.65. Adjusted EPS excludes $114 million and $106 million of intangible asset amortization related to acquisition activity in the three months ended June 30, 2011 and 2010, respectively. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for both the three months ended June 30, 2011 and 2010 was $0.60.
Larry Merlo, President and Chief Executive Officer, stated, "I'm very pleased with our second quarter results, which were at the high end of our guidance. While our Pharmacy Services business performed as expected, the Retail business exceeded our goals due to solid expense control and higher than expected generic utilization. At the same time, we generated more than $800 million in free cash in the quarter, bringing our year-to-date free cash flow to $2.4 billion."
Mr. Merlo continued: "We've made terrific progress on our five-point plan for PBM profit improvement. Our PBM has had an outstanding selling season to date, with excellent retention of existing business as well as a number of significant new business wins. We've seen increased adoption of our differentiated product offerings, such as Maintenance Choice and Pharmacy Advisor, clearly demonstrating that our model is resonating with payors. Furthermore, we have made good progress on the integration of the Universal American Medicare Part D Business, the implementation of the Aetna contract, and the streamlining initiatives to generate significant efficiencies within our PBM. Combined, these efforts should generate healthy performance in our PBM in the years ahead."
Acquisition of Universal American Medicare Part D Business
On April 29, 2011, the Company acquired the UAM Medicare Part D Business for approximately $1.3 billion. 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.
Real Estate Program
During the three months ended June 30, 2011, the Company opened 41 new retail drugstores and closed two retail specialty pharmacy stores, five specialty mail order pharmacies, one retail apothecary pharmacy store and one retail drugstore. In addition, the Company relocated 18 retail drugstores. As of June 30, 2011, the Company operated 7,346 locations, included in which were 7,266 retail drugstores, 31 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.
Taking into account the solid results reported year to date, continued confidence in the remainder of the year, and incremental start-up costs for the significant 2012 new business, the Company narrowed its earnings per share guidance range for the full year 2011. The Company now expects adjusted EPS from continuing operations to be in the range of $2.75 to $2.81 and GAAP earnings per share from continuing operations to be in the range of $2.55 to $2.61, compared to its previous guidance range of $2.72 to $2.82, and $2.52 to $2.62, respectively.
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 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 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 7,200 CVS/pharmacy© 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 health care 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, 2010 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
Condensed Consolidated Statements of Income (Unaudited)