CVS Caremark Corporation Reports Record Second Quarter Results
WOONSOCKET, R.I., Aug. 5, 2014 /PRNewswire/ --
Second Quarter Year-over-year Highlights:
- Net revenues increased 10.7% to approximately $34.6 billion
- Operating profit increased 11.9% to approximately $2.2 billion
- Adjusted EPS increased 16.5% to $1.13, while GAAP diluted EPS from continuing operations increased 16.7% to $1.06
- Generated free cash flow of $2.2 billion
- Cash flow from operations of $3.1 billion
- Full-year Adjusted EPS range raised and narrowed to $4.43 to $4.51, up from $4.36 to $4.50
- GAAP diluted EPS from continuing operations range raised and narrowed to $4.16 to $4.24, up from $4.09 to $4.23
- Provided third quarter Adjusted EPS guidance of $1.11 to $1.14 and GAAP diluted EPS from continuing operations guidance of $1.04 to $1.07
- Full year free cash flow range confirmed at $5.5 to $5.8 billion; cash flow from operations raised to $7.2 to $7.5 billion, up from $7.0 to $7.3 billion
CVS Caremark Corporation (NYSE: CVS) today announced operating results for the three months ended June 30, 2014.
Net revenues for the three months ended June 30, 2014, increased 10.7%, or approximately $3.4 billion, to $34.6 billion compared to the three months ended June 30, 2013.
Revenues in the Pharmacy Services Segment increased 16.2%, or $3.0 billion, to $21.8 billion in the three months ended June 30, 2014. The increase was driven by net new business, growth in specialty pharmacy including the acquisition of Coram and the impact of Specialty Connect®, drug inflation and product mix, partially offset by an increase in generic dispensing. Pharmacy network claims processed during the three months ended June 30, 2014 increased 2.2% to 210.4 million compared to 205.9 million in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business, partially offset by a decrease in Medicare Part D claims. Mail choice claims processed during the three months ended June 30, 2014 decreased 1.0% to 20.5 million, compared to 20.7 million in the prior year. The decrease in mail choice claims was driven by a decline in traditional mail volumes, which was partially offset by growth in our Maintenance Choice program.
Revenues in the Retail Pharmacy Segment increased 4.5%, or $732 million, to $16.9 billion in the three months ended June 30, 2014. Same store sales increased 3.3% versus the second quarter of last year, with pharmacy same store sales up 5.0% and front store same store sales down 0.4%. Pharmacy same store prescription volumes rose 3.9% on a 30-day equivalent basis. Front store same store sales were positively impacted by approximately 80 basis points from the shift of the Easter holiday from March in 2013 to April in 2014. Front store same store sales were negatively impacted by softer customer traffic, partially offset by an increase in basket size. In addition, front store same store sales would have been approximately 110 basis points higher if tobacco and the estimated associated basket sales were excluded. Pharmacy same store sales were negatively impacted by approximately 160 basis points from recent generic drug introductions and by approximately 130 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.
Specialty Connect integrates the Company's mail and retail capabilities, providing members with the choice to bring their specialty prescriptions to any CVS/pharmacy® location. Whether submitted through our mail order pharmacy or at CVS/pharmacy, all prescriptions are filled through the Company's specialty mail order pharmacies, so all revenue from this specialty prescription services program is recorded within the Pharmacy Services Segment. Members then can choose to pick up their medication at their local CVS/pharmacy or have it sent to their home through the mail.
For the three months ended June 30, 2014, the generic dispensing rate increased approximately 180 basis points in the Pharmacy Services Segment, to 82.4%, and approximately 160 basis points in the Retail Pharmacy Segment, to 83.5%, compared to the prior year.
Net income for the three months ended June 30, 2014, increased 10.9%, or approximately $122 million, to $1.2 billion, compared with approximately $1.1 billion during the three months ended June 30, 2013. The Pharmacy Services and Retail Pharmacy segments both benefited from the impact of increased generic drugs dispensed and, consistent with our guidance, from the State of California's finalization of Medicaid reimbursement rates relative to our historic rate estimates. The Pharmacy Services Segment was positively impacted by growth in specialty pharmacy and favorable purchasing economics. The Retail Pharmacy Segment was positively impacted by increased sales and an improved margin rate, partially offset by incremental store operating costs associated with operating more stores. Adjusted earnings per share (Adjusted EPS) for the three months ended June 30, 2014 and 2013, was $1.13 and $0.97, respectively, an increase of 16.5%. Adjusted EPS in the three months ended June 30, 2014 excludes $133 million and $124 million in 2014 and 2013, respectively, of intangible asset amortization related to acquisition activity. GAAP earnings per diluted share for the three months ended June 30, 2014 and 2013, was $1.06 and $0.91, respectively, an increase of 16.7%.
President and Chief Executive Officer Larry Merlo stated, "I'm extremely pleased with our strong performance this quarter. With Adjusted EPS increasing 16.5%, we came in two cents above the high end of our expectations. This was fueled by solid results across the enterprise, as both the PBM and retail businesses exceeded revenue expectations while delivering strong gross margins. Operating profit in the PBM increased 30%, exceeding expectations, while operating profit in the retail business grew 6.5%, at the high end of our expectations." Mr. Merlo continued, "Additionally, we have generated significant free cash flow through the first half of this year. Between dividends and share repurchases, we have returned $2.6 billion to our shareholders year-to-date, and remain on track to achieve our goal of returning more than $5 billion in 2014."
The Company raised and narrowed its earnings guidance range for the full year 2014.
To read full press release, please click here.
Help employers find you! Check out all the jobs and post your resume.