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CVS Caremark Reports Record Second Quarter Results

August 7, 2012

WOONSOCKET, R.I., Aug. 7, 2012 /PRNewswire/ — CVS Caremark Corporation (NYSE: CVS) today announced revenues, operating profit and net income for the three months ended June 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20090226/NE75914LOGO )

Second Quarter and Year-Over-Year Highlights:

  • Net revenues increased 16.3% to a record $30.7 billion, with Pharmacy Services up 28.2% and Retail Pharmacy up 6.9%
  • Retail Pharmacy same stores sales increased 5.6%
  • Income from continuing operations increased 18.9%
  • Adjusted EPS of $0.81, up 25.2%; GAAP diluted EPS from continuing operations of $0.75

Year-to-Date Highlights:

  • Generated free cash flow of $3.2 billion
  • Cash flow from operations of $4.0 billion

2012 Guidance:

  • Full-year Adjusted EPS raised and narrowed to $3.32 to $3.38
  • Full-year GAAP diluted EPS from continuing operations raised and narrowed to $3.09 to $3.15
  • Confirmed full-year free cash flow guidance of $4.6 to $4.9 billion and cash flow from operations of $6.2 to $6.4 billion

Revenues

Net revenues for the three months ended June 30, 2012 increased 16.3%, or $4.3 billion, to $30.7 billion, up from $26.4 billion in the three months ended June 30, 2011.

Revenues in the Pharmacy Services Segment increased 28.2% to $18.4 billion in the three months ended June 30, 2012. This increase was primarily driven by new client starts associated with our highly successful 2012 selling season, drug cost inflation, and new activity resulting from our acquisition of the Medicare prescription drug plan of Universal American Corp. (“UAM Medicare PDP Business”) on April 29, 2011. Pharmacy network claims processed during the three months ended June 30, 2012 increased 13.7%, to 197.8 million, compared to 174.0 million in the prior year period. The increase in pharmacy network claims was primarily due to new client starts and the Company’s 2011 acquisition of the UAM Medicare PDP Business. Mail choice claims processed during the three months ended June 30, 2012 increased approximately 15.5% to 20.5 million compared to 17.8 million in the prior year period. The increase in the mail choice claim volume was primarily driven by new client starts and the continued adoption of our unique Maintenance Choice(®) program.

Revenues in the Retail Pharmacy Segment increased 6.9% to $15.8 billion in the three months ended June 30, 2012. Same store sales increased 5.6% over the prior year period, with pharmacy same store sales increasing 7.2% over the prior year period. The increase in pharmacy same store sales included a significant benefit associated with Walgreens not being part of the Express Scripts pharmacy provider network during the quarter. Additionally, pharmacy same store prescription volumes rose 7.7% when 90-day scripts are counted as one script. When converting 90-day scripts into three scripts, our same store prescription volumes increased 9.8% in the quarter. Pharmacy same store sales were negatively impacted by approximately 500 basis points due to recent generic introductions. Front store same store sales increased 2.3% in the three months ended June 30, 2012.

For the three months ended June 30, 2012, the generic dispensing rate increased approximately 390 basis points to 78.0% in our Pharmacy Services Segment and 350 basis points to 79.1% in our Retail Pharmacy Segment, compared to the prior year period.

Income from Continuing Operations Attributable to CVS Caremark

Income from continuing operations attributable to CVS Caremark for the three months ended June 30, 2012 increased $153 million, to $967 million, compared with $814 million during the three months ended June 30, 2011. The increase in income from continuing operations attributable to CVS Caremark was primarily driven by an 18.5% increase in operating profit in our Retail Pharmacy Segment. Our retail business benefited significantly from the contractual impasse between Walgreens and Express Scripts, the impact of increased generic drugs dispensed, and the continued growth of our Maintenance Choice program. Adjusted earnings per share from continuing operations attributable to CVS Caremark (“Adjusted EPS”) for the three months ended June 30, 2012 and 2011 were $0.81 and $0.65, respectively. Adjusted EPS excludes $123 million and $114 million of intangible asset amortization related to acquisition activity in the three months ended June 30, 2012 and 2011, respectively. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for the three months ended June 30, 2012 and 2011 were $0.75 and $0.60, respectively.

Larry Merlo, president and CEO, stated, “I’m very pleased with our strong operating performance this quarter, as we delivered results that were at or above our expectations in both the retail and PBM segments. Our retail business continued to benefit from the market disruption caused by the contractual impasse between two of our competitors, and we have detailed plans in place to maximize retention following their mid-September resolution. While the 2013 PBM selling season is still underway, we have achieved positive net-new business to-date and we are focused on the opportunities that remain. With our stable business and differentiated offerings, we remain very well positioned in the marketplace.”

Real Estate Program

During the three months ended June 30, 2012, the Company opened 36 new retail drugstores and closed eight retail drugstores and one onsite pharmacy. In addition, the Company relocated 24 retail drugstores. As of June 30, 2012, the Company operated 7,457 locations, including 7,381 retail drugstores, 28 onsite pharmacies, 31 retail specialty pharmacy stores, 12 specialty mail order pharmacies and five mail order pharmacies in 44 states, the District of Columbia and Puerto Rico.

Guidance

The Company raised and narrowed its earnings guidance for the full year 2012, reflecting its strong performance year-to-date and a solid outlook for the remainder of the year. The new guidance includes the anticipated benefit in the third and fourth quarters combined of approximately $0.05 per share related to the prescription business expected to be retained from the contractual impasse between Walgreens and Express Scripts. On July 19, 2012, Walgreens and Express Scripts announced that Walgreens will re-enter Express Scripts’ broadest retail pharmacy network as of September 15, 2012. In the fourth quarter, the Company expects to retain at least 50% of the prescription business gained during the impasse. The Company currently expects to deliver Adjusted EPS of $3.32 to $3.38 for the full year 2012, up from its previous guidance of $3.23 to $3.33. The Company currently expects to deliver GAAP diluted earnings per share from continuing operations of $3.09 to $3.15 for the full year 2012, up from its previous guidance of $3.01 to $3.11. The Company now expects the Retail Pharmacy Segment’s operating profit to increase between 14% and 15%, and the Pharmacy Services Segment’s operating profit to increase between 13% and 15%. The Company reiterated its 2012 free cash flow guidance and expects to generate between $4.6 billion and $4.9 billion for the year. Further, the Company confirmed that it expects to generate cash flow from operations in 2012 in the range of $6.2 billion to $6.4 billion. These 2012 guidance estimates assume the completion of the remaining $1.0 billion in previously authorized share repurchases.

Teleconference and Webcast

The Company will be holding a conference call today for the investment community at 8:30 a.m. (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 dedicated to helping people on their path to better health as the largest integrated pharmacy company in the United States. Through the Company’s approximately 7,400 CVS/pharmacy(®) stores; its leading pharmacy benefit manager serving more than 60 million plan members; and its retail health clinic system, the largest in the nation with approximately 600 MinuteClinic(®) locations, it is a market leader in mail order, retail and specialty pharmacy, retail clinics, and Medicare Part D Prescription Drug Plans. As a pharmacy innovation company with an unmatched breadth of capabilities, CVS Caremark continually strives to improve health and lower costs by developing new approaches such as its unique Pharmacy Advisor(®) program that helps people with chronic diseases such as diabetes obtain and stay on their medications. Find more information about how CVS Caremark is reinventing pharmacy for better health 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, 2011 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         Six Months Ended
                                                                                                                        June 30,                  June 30,
                                                                                                                        --------                  --------
    In millions, except per share amounts                                                                           2012(1)              2011        2012(1)      2011
    -------------------------------------                                                                            ------              ----         ------      ----

    Net revenues                                                                                                    $30,714           $26,414        $61,512   $52,109
    Cost of revenues                                                                                                 25,265            21,328         50,950    42,281
                                                                                                                     ------            ------         ------
    Gross profit                                                                                                      5,449             5,086         10,562     9,828
    Operating expenses                                                                                                3,741             3,602          7,451     7,039
                                                                                                                      -----             -----          -----     -----
    Operating profit                                                                                                  1,708             1,484          3,111     2,789
    Interest expense, net                                                                                               132               148            263       282
                                                                                                                        ---               ---            ---       ---
    Income before income tax provision                                                                                1,576             1,336          2,848     2,507
    Income tax provision                                                                                                610               523          1,106       985
                                                                                                                        ---               ---          -----       ---
    Income from continuing operations                                                                                   966               813          1,742     1,522
    Income (loss) from discontinued operations, net of tax                                                               (1)                2             (2)        5
                                                                                                                        ---               ---            ---       ---
    Net income                                                                                                          965               815          1,740     1,527
    Net loss attributable to noncontrolling interest                                                                      1                 1              2         2
                                                                                                                        ---               ---            ---       ---
    Net income attributable to CVS Caremark                                                                            $966              $816         $1,742    $1,529
                                                                                                                                         ====         ======

    Income from continuing operations attributable to CVS
      Caremark:
        Income from continuing operations                                                                              $966              $813         $1,742    $1,522
        Net loss attributable to noncontrolling interest                                                                  1                 1              2         2
        Income from continuing operations attributable to CVS Caremark                                                 $967              $814         $1,744    $1,524
                                                                                                                       ====              ====         ======    ======

    Basic earnings per common share:
      Income from continuing operations attributable to CVS Caremark                                                  $0.76             $0.60          $1.35     $1.12
        Income (loss) from discontinued operations attributable to CVS                                                    -                 -              -         -
            Caremark

        Net income attributable to CVS Caremark                                                                       $0.76             $0.60          $1.35     $1.13
                                                                                                                      =====             =====          =====     =====
        Weighted average basic common shares outstanding                                                              1,278             1,355          1,289     1,359
                                                                                                                      =====             =====          =====     =====

    Diluted earnings per common share:
    Income from continuing operations attributable to CVS Caremark                                                    $0.75             $0.60          $1.34     $1.11
        Income (loss) from discontinued operations attributable to CVS                                                    -                 -              -         -
             Caremark

        Net income attributable to CVS Caremark                                                                       $0.75             $0.60          $1.34     $1.12
                                                                                                                      =====             =====          =====     =====
        Weighted average diluted common shares outstanding                                                            1,287             1,364          1,298     1,368
                                                                                                                      =====             =====          =====     =====

    Dividends declared per common share                                                                             $0.1625           $0.1250        $0.3250   $0.2500
                                                                                                                    =======           =======        =======   =======

    (1) Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment.
        Additional details of this accounting change are discussed in Note 2 to the condensed consolidated financial statements included in the Company's
        Form 10-Q for the quarter ended June 30, 2012.

                                                                                  CVS CAREMARK CORPORATION
                                                                            Condensed Consolidated Balance Sheets
                                                                                         (Unaudited)

                                                                                                                  June 30,          December 31,
    In millions, except per share amounts                                                                                  2012(1)                  2011
    -------------------------------------                                                                                   ------                  ----
    Assets:
        Cash and cash equivalents                                                                                           $1,823                $1,413
        Short-term investments                                                                                                   5                     5
        Accounts receivable, net                                                                                             6,124                 6,047
        Inventories                                                                                                         10,428                10,046
        Deferred income taxes                                                                                                  535                   503
        Other current assets                                                                                                   384                   580
                                                                                                                               ---                   ---
           Total current assets                                                                                             19,299                18,594
        Property and equipment, net                                                                                          8,614                 8,467
        Goodwill                                                                                                            26,425                26,458
        Intangible assets, net                                                                                               9,891                 9,869
        Other assets                                                                                                         1,360                 1,155
                                                                                                                             -----                 -----
           Total assets                                                                                                    $65,589               $64,543
                                                                                                                           =======               =======

    Liabilities:
        Accounts payable                                                                                                    $4,903                $4,370
        Claims and discounts payable                                                                                         3,648                 3,487
        Accrued expenses                                                                                                     4,380                 3,293
        Short-term debt                                                                                                        200                   750
        Current portion of long-term debt                                                                                        5                    56
                                                                                                                               ---                   ---
           Total current liabilities                                                                                        13,136                11,956
        Long-term debt                                                                                                       9,208                 9,208
        Deferred income taxes                                                                                                3,894                 3,853
        Other long-term liabilities                                                                                          1,438                 1,445
        Commitments and contingencies
        Redeemable noncontrolling interest                                                                                       -                    30

    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; 1,658 shares
            issued and 1,271 shares outstanding at June 30, 2012 and 1,640                                                                            16
            shares issued and 1,298 shares outstanding at December 31, 2011                                                     17
    Treasury stock, at cost: 385 shares at June 30, 2012 and 340 shares at
            December 31, 2011                                                                                              (13,945)              (11,953)
    Shares held in trust: 2 shares at June 30, 2012                                                                                                  (56)
        and December 31, 2011                                                                                                  (56)
    Capital surplus                                                                                                         28,744                28,126
    Retained earnings                                                                                                       23,324                22,090
    Accumulated other comprehensive loss                                                                                      (171)                 (172)
                                                                                                                              ----                  ----
        Total shareholders' equity                                                                                          37,913                38,051
                                                                                                                            ------                ------
    Total liabilities and shareholders' equity                                                                             $65,589               $64,543
                                                                                                                           =======               =======

    (1) Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment.
        Additional details of this accounting change are discussed in Note 2 to the condensed consolidated financial statements included in the Company's
        Form 10-Q for the quarter ended June 30, 2012.

                                                                                         CVS CAREMARK CORPORATION
                                                                              Condensed Consolidated Statements of Cash Flows
                                                                                                (Unaudited)

                                                                                                                              Six Months Ended
                                                                                                                                  June 30,
                                                                                                                                  --------
    In millions                                                                                                                2012(1)            2011
    -----------                                                                                                                 ------            ----
    Cash flows from operating activities:
        Cash receipts from customers                                                                                           $57,644         $47,950
        Cash paid for inventory and prescriptions dispensed by retail network pharmacies                                       (45,289)        (37,307)
        Cash paid to other suppliers and employees                                                                              (7,134)         (6,149)
        Interest received                                                                                                            1               2
        Interest paid                                                                                                             (281)           (298)
        Income taxes paid                                                                                                         (924)         (1,125)
                                                                                                                                  ----          ------
    Net cash provided by operating activities                                                                                    4,017           3,073
                                                                                                                                 -----           -----

    Cash flows from investing activities:
        Purchases of property and equipment                                                                                       (818)           (710)
        Proceeds from sale-leaseback transactions                                                                                    -              11
        Acquisitions (net of cash acquired) and other investments                                                                 (274)         (1,366)
        Purchase of available-for-sale investments                                                                                   -              (2)
        Maturity of available-for-sale investments                                                                                   -               1
        Proceeds from sale of subsidiary                                                                                             7               -
                                                                                                                                   ---             ---
    Net cash used in investing activities                                                                                       (1,085)         (2,066)
                                                                                                                                ------          ------

    Cash flows from financing activities:
        Decrease in short-term debt                                                                                               (550)           (300)
        Proceeds from issuance of long-term debt                                                                                     -           1,463
        Repayments of long-term debt                                                                                               (54)           (302)
        Purchase of noncontrolling interest in subsidiary                                                                          (26)              -
        Dividends paid                                                                                                            (420)           (341)
        Derivative settlements                                                                                                       -             (19)
        Proceeds from exercise of stock options                                                                                    518             264
        Excess tax benefits from stock-based compensation                                                                            8               -
        Repurchase of common stock                                                                                              (1,998)           (971)
                                                                                                                                ------            ----
    Net cash used in financing activities                                                                                       (2,522)           (206)
                                                                                                                                ------            ----
    Net increase in cash and cash equivalents                                                                                      410             801
    Cash and cash equivalents at beginning of period                                                                             1,413           1,427
                                                                                                                                 -----           -----
    Cash and cash equivalents at end of period                                                                                  $1,823          $2,228
                                                                                                                                ======          ======

    Reconciliation of net income to net cash provided by operating activities:
        Net income                                                                                                              $1,740          $1,527
    Adjustments required to reconcile net income to net cash provided by operating
           activities:
              Depreciation and amortization                                                                                        854             765
              Stock-based compensation                                                                                              64              65
              Deferred income taxes and other noncash items                                                                         83             129
              Change in operating assets and liabilities, net of effects from acquisitions:
                Accounts receivable, net                                                                                           (13)           (472)
                    Inventories                                                                                                   (527)            584
                    Other current assets                                                                                           254            (164)
                    Other assets                                                                                                  (181)            (62)
                    Accounts payable                                                                                               655             722
                    Accrued expenses                                                                                             1,095              54
                    Other long-term liabilities                                                                                     (7)            (75)
                                                                                                                                   ---             ---
    Net cash provided by operating activities                                                                                   $4,017          $3,073
                                                                                                                                ======          ======

    (1) Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment.
        Additional details of this accounting change are discussed in Note 2 to the condensed consolidated financial statements included in the Company's
        Form 10-Q for the quarter ended June 30, 2012.

       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   Six Months Ended
                                                                    June 30,            June 30,
                                                                    --------            --------
    In millions, except per share amounts                           2012          2011(2)       2012 2011(2)
    -------------------------------------                           ----           ------        ---- ------

    Income before income tax provision                            $1,576           $1,336      $2,848 $2,507
    Amortization                                                     123              114         241    220
                                                                     ---              ---         ---
    Adjusted income before income tax provision                    1,699            1,450       3,089  2,727
    Adjusted income tax provision(1)                                 658              568       1,199  1,072
                                                                     ---              ---       -----  -----
    Adjusted income from continuing operations                     1,041              882       1,890  1,655
    Net loss attributable to noncontrolling interest                   1                1           2      2
                                                                     ---              ---         ---    ---
    Adjusted income from continuing operations attributable to    $1,042             $883      $1,892 $1,657
        CVS Caremark

    Weighted average diluted common shares outstanding             1,287            1,364       1,298  1,368
    Adjusted earnings per share from continuing operations         $0.81            $0.65       $1.46  $1.21
        attributable to CVS Caremark
    (1) The adjusted income tax provision is computed using the effective income tax rate from the consolidated statement of income.
    (2) The adjusted results for the three and six months ended June 30, 2011 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:

                                                     Six Months Ended
                                                         June 30,
                                                         --------
    In millions                                        2012             2011
    -----------                                        ----             ----

    Net cash provided by operating activities        $4,017           $3,073
      Subtract: Additions to property and equipment    (818)            (710)
      Add: Proceeds from sale-leaseback transactions      -               11
                                                        ---              ---
    Free cash flow                                   $3,199           $2,374
                                                     ------           ------

           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:

                                  Pharmacy             Retail        Corporate          Intersegment        Consolidated
    In millions                   Services            Pharmacy         Segment        Eliminations(2)          Totals
                                Segment(1)(3)         Segment
    ---                         ------------          -------
    Three Months Ended
      June 30, 2012:
        Net revenues                          $18,423          $15,846     $      --                  $(3,555)           $30,714
        Gross profit                              777            4,769            --                      (97)             5,449
        Operating profit (loss)                   511            1,469          (175)                     (97)             1,708
      June 30, 2011:                                                                                                      26,414
        Net revenues                           14,374           14,826            --                   (2,786)
        Gross profit                              720            4,408            --                      (42)             5,086
        Operating profit (loss)                   448            1,240          (162)                     (42)             1,484
    Six Months Ended
      June 30, 2012:
        Net revenues                           36,722           31,869            --                   (7,079)            61,512
        Gross profit                            1,393            9,341            --                     (172)            10,562
        Operating profit (loss)                   860            2,766          (343)                    (172)             3,111
      June 30, 2011:
        Net revenues                           28,203           29,413            --                   (5,507)            52,109
        Gross profit                            1,350            8,555            --                      (77)             9,828
        Operating profit (loss)                   839            2,336          (309)                     (77)             2,789
    Total assets:
      June 30, 2012                            36,039           28,951         1,253                     (654)            65,589
      December 31, 2011                        35,704           28,323         1,121                     (605)            64,543
    Goodwill:
      June 30, 2012                            19,624            6,801            --                       --             26,425
      December 31, 2011                        19,657            6,801            --                       --             25,458

    (1) Net revenues of the Pharmacy Services Segment include approximately $2.1 billion and $1.9 billion of retail co-payments for the three months
        ended June 30, 2012 and 2011, respectively, as well as $4.4 billion and $4.1 billion of retail co-payments for the six months ended June 30, 2012
        and 2011, 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. Beginning in the fourth
        quarter of 2011, the Maintenance Choice eliminations reflect all discounts available for the purchase of mail order prescription drugs. The
        following amounts are eliminated in consolidation in connection with the item (ii) intersegment activity: net revenues of $840 million and $626
        million for the three months ended June 30, 2012 and 2011, respectively, and $1.6 billion and $1.2 billion for the six months ended June 30, 2012
        and 2011, respectively; gross profit and operating profit of $97 million and $42 million for the three months ended June 30, 2012 and 2011,
        respectively, and $172 million and $77 million for the six months ended June 30, 2012 and 2011, respectively.
    (3) The results of the Pharmacy Services Segment for the three and six months ended June 30, 2011 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      Six Months Ended
                                                  June 30,               June 30,
                                                  --------               --------
    In millions                                 2012            2011(4)         2012  2011(4)
    -----------                                 ----             ------         ----   ------

    Net revenues                             $18,423            $14,374      $36,722  $28,203
    Gross profit                                 777                720        1,393    1,350
        Gross profit % of net revenues           4.2%               5.0%         3.8%     4.8%
    Operating expenses                           266                272          533      511
         Operating expense % of net revenues     1.4%               1.9%         1.5%     1.8%
    Operating profit                             511                448          860      839
         Operating profit % of net revenues      2.8%               3.1%         2.3%     3.0%

    Net revenues(1):
        Mail choice(2)                        $5,744             $4,582      $11,410   $8,975
       Pharmacy network(3)                    12,625              9,737       25,209   19,114
        Other                                     54                 55          103      114
    Pharmacy claims processed(1):
        Total                                  218.3              191.8        437.2    367.0
        Mail choice(2)                          20.5               17.8         40.9     35.3
        Pharmacy network(3)                    197.8              174.0        396.3    331.7
    Generic dispensing rate(1):
        Total                                   78.0%              74.1%        77.3%    73.9%
        Mail choice(2)                          71.2%              64.6%        70.1%    64.2%
        Pharmacy network(3)                     78.6%              75.0%        78.0%    74.9%
    Mail choice penetration rate                22.9%              22.6%        22.9%    23.3%

    (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 includes 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.
    (4) The results of the Pharmacy Services Segment for the three and six months ended June 30, 2011 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.

    The following is a
     reconciliation of operating
     profit to EBITDA for the
     Pharmacy Services Segment:

                              Three Months
                                 Ended             Six Months Ended
                               June 30,                June 30,
                               --------                --------
    In millions, except per
     adjusted claim amounts  2012          2011(1)          2012    2011(1)
    -----------------------  ----           ------          ----     ------

    Operating profit         $511             $448          $860       $839
    Depreciation and
     amortization             129              107           251        205
                              ---              ---           ---        ---
    EBITDA                    640              555         1,111      1,044
      Adjusted claims       256.7            224.9         513.7      432.5
                            -----            -----         -----      -----
    EBITDA per adjusted
     claim                  $2.49            $2.46         $2.16      $2.41
                            =====            =====         =====      =====

    (1) The results of the Pharmacy Services Segment for the three and six months ended June 30, 2011 have been revised to reflect the results of
        TheraCom as discontinued operations.

           Supplemental Information
                 (Unaudited)

    Retail Pharmacy Segment

    The following table summarizes the
     Retail Pharmacy Segment's
     performance for the respective
     periods:

                                             Three Months Ended      Six Months Ended
                                                  June 30,               June 30,
                                                  --------               --------
    In millions                                 2012               2011         2012     2011
    -----------                                 ----               ----         ----     ----

    Net revenues                             $15,846            $14,826      $31,869  $29,413
    Gross profit                               4,769              4,408        9,341    8,555
        Gross profit % of net revenues          30.1%              29.7%        29.3%    29.1%
    Operating expenses                         3,300              3,168        6,575    6,219
         Operating expense % of net revenues    20.8%              21.4%        20.6%    21.1%
    Operating profit                           1,469              1,240        2,766    2,336
         Operating profit % of net revenues      9.3%               8.4%         8.7%     7.9%

    Net revenue increase:
        Total                                    6.9%               3.6%         8.4%     4.0%
        Pharmacy                                 8.3%               3.9%         9.7%     4.5%
        Front store                              3.9%               3.0%         5.5%     2.9%
    Same store sales increase:
        Total                                    5.6%               2.0%         7.0%     2.3%
        Pharmacy                                 7.2%               2.6%         8.5%     3.1%
        Front store                              2.3%               0.8%         3.7%     0.6%
    Generic dispensing rate                     79.1%              75.6%        78.6%    75.4%
    Pharmacy % of total revenues                68.8%              67.9%        69.4%    68.5%
    Third party % of pharmacy revenue           97.6%              97.7%        97.9%    97.6%
    Retail prescriptions filled                176.4              162.4        355.9    328.0

       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,
     2011 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, 2012
    -------------------------------------                                               -----------------

    Income before income tax provision                                                             $6,477 $6,596
    Amortization                                                                                      480    482
                                                                                                      ---    ---
    Adjusted income before income tax provision                                                     6,957  7,078
    Adjusted income tax provision                                                                   2,691  2,736
                                                                                                    -----  -----
    Adjusted income from continuing operations                                                      4,266  4,342
    Net loss attributable to noncontrolling interest                                                    2      2
                                                                                                      ---    ---
    Adjusted income from continuing operations attributable to CVS Caremark                        $4,268 $4,344
                                                                                                   ====== ======
    Weighted average diluted common shares outstanding                                              1,287  1,287
    Adjusted earnings per share from continuing operations attributable to CVS Caremark             $3.32  $3.38
                                                                                                    =====  =====

         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,
     2011 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, 2012
    -----------                    -----------------

    Net cash provided by operating
     activities                                $6,223  $6,404
        Subtract:  Additions to
         property and equipment                (2,145) (2,075)
        Add:  Proceeds from sale-
         leaseback transactions                   500     600
                                                  ---     ---
    Free cash flow                             $4,578  $4,929
                                               ======  ======

SOURCE CVS Caremark Corporation


Source: PR Newswire