CVS Caremark Reports Record Fourth Quarter And Full Year 2012 Results

Wed Feb 6, 2013 7:00am EST

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WOONSOCKET, R.I.,  Feb. 6, 2013  /PRNewswire/ -- CVS Caremark Corporation (NYSE:
CVS) today announced operating results for the three months and year ended 
December 31, 2012.  

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

Fourth Quarter Year-over-year Highlights:

* Net revenues increased 10.9% to a record  $31.4 billion, with Pharmacy
Services up 17.4% and Retail Pharmacy up 5.1%  
* Retail Pharmacy segment same store sales increased 4.0%
* Operating profit increased 17.7% to a record  $2.3 billion
* Adjusted EPS of  $0.97  and GAAP diluted EPS from continuing operations of 
$0.90, both of which include a  $0.17  per share loss on early extinguishment of
debt
* Adjusted EPS of  $1.14, excluding the loss on early extinguishment of debt

Full Year Highlights:

* Net revenues increased 15.0% to a record  $123.1 billion, with Pharmacy
Services up 24.7% and Retail Pharmacy up 6.8%
* Retail Pharmacy segment same store sales increased 5.5%
* Operating profit increased 14.2% to a record  $7.2 billion
* Adjusted EPS of  $3.27  and GAAP diluted EPS from continuing operations of 
$3.03, both of which include a  $0.17  per share loss on early extinguishment of
debt
* Adjusted EPS of  $3.43, excluding the loss on early extinguishment of debt
* Generated free cash flow of  $5.2 billion; cash flow from operations of  $6.7
billion

2013 Guidance:

* Raised full year Adjusted EPS to  $3.86 to $4.00; GAAP diluted EPS from
continuing operations of  $3.61 to $3.75, to reflect the impact of debt
refinancing  
* Confirmed first quarter Adjusted EPS from continuing operations of  $0.77 to
$0.80; GAAP diluted EPS from continuing operations of  $0.71 to $0.74
* Confirmed full year free cash flow of  $4.8 to $5.1 billion; cash flow from
operations of  $6.4 to $6.6  billion

Revenues

Net revenues for the three months ended  December 31, 2012, increased 10.9%, or 
$3.1 billion, to  $31.4 billion, up from  $28.3 billion  in the three months
ended  December 31, 2011. For the year ended  December 31, 2012, total revenue
increased 15.0%, or  $16.0 billion, to  $123.1 billion, compared to  $107.1
billion  for the year ended  December 31, 2011.  

Revenues in the Pharmacy Services segment increased 17.4% to  $18.6 billion  in
the three months ended  December 31, 2012. This increase was primarily
associated with new 2012 client starts, drug cost inflation and the growth of
our Medicare Part D program. Pharmacy network claims processed during the three
months ended  December 31, 2012, increased 6.5% to 205.5 million, compared to
193.0 million in the prior year period. The increase in pharmacy network claims
was primarily due to a large number of 2012 new client starts, as well as higher
claims activity associated with our Medicare Part D program. Mail choice claims
processed during the three months ended  December 31, 2012, increased
approximately 14.6% to 20.4 million compared to 17.8 million in the prior year
period. The increase in the mail choice claim volume was primarily due to a
significant number of 2012 new client starts, as well as increased claims
associated with the continuing client adoption of our Maintenance Choice
offerings. For the year ended  December 31, 2012, total revenue in the Pharmacy
Services segment increased 24.7% to  $73.4 billion, compared to  $58.9 billion 
in the year ended  December 31, 2011.

Revenues in the Retail Pharmacy segment increased 5.1% to  $16.3 billion  in the
three months ended  December 31, 2012. Same store sales increased 4.0% over the
prior year period, with pharmacy same store sales up 4.0% and front store same
store sales up 3.9%. Calendar day shifts in the fourth quarter of 2012, which
had one additional Monday and one fewer Saturday compared with the same period
in 2011, positively impacted pharmacy same store sales by approximately 80 basis
points. Additionally, pharmacy same store prescription volumes rose 9.0% when
90-day prescriptions are counted as one prescription. After converting each
90-day prescription into three prescriptions, same store prescription volumes
increased 11.0% in the quarter. Pharmacy same store sales were negatively
impacted by approximately 11 percentage points due to recent generic
introductions. For the year ended  December 31, 2012, total revenue in the
Retail Pharmacy segment increased 6.8% to  $63.7 billion, compared to  $59.6
billion  in the year ended  December 31, 2011. Same store sales increased 5.5%
for the year ended  December 31, 2012, over the prior year, with pharmacy same
store sales up 6.5% and front store same store sales up 3.4%.

For the three months ended  December 31, 2012, the generic dispensing rate
increased approximately 500 basis points to 80.0% in our Pharmacy Services
segment and approximately 400 basis points to 79.9% 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  December 31, 2012, increased 2.7%, or  $29 million, to  $1.13
billion, compared with  $1.10 billion  during the three months ended  December
31, 2011. The increase in income from continuing operations was primarily driven
by improved operating profit in both our Pharmacy Services and Retail Pharmacy
segments. Adjusted earnings per share from continuing operations attributable to
CVS Caremark (Adjusted EPS) for the three months ended  December 31, 2012  and
2011, was  $0.97  and  $0.89, respectively. These include a  $348 million, or an
approximate  $0.17  per share, loss on early extinguishment of debt recognized
in the fourth quarter of 2012. Excluding the loss on early extinguishment of
debt, Adjusted EPS increased 27.9% in the fourth quarter to  $1.14. Adjusted EPS
excludes  $124 million  and  $114 million  of intangible asset amortization
related to acquisition activity in the three months ended  December 31, 2012 
and 2011, respectively. GAAP earnings per diluted share from continuing
operations attributable to CVS Caremark for the three months ended  December 31,
2012  and 2011, was  $0.90  and  $0.84, respectively, which also includes the
impact of the loss on early extinguishment of debt recognized in the fourth
quarter of 2012.  

Income from continuing operations attributable to CVS Caremark for the year
ended  December 31, 2012, increased 11.3%, or  $392 million, to  $3.9 billion,
compared to  $3.5 billion  in the prior year. Adjusted EPS, which excludes  $486
million  and  $452 million  of intangible asset amortization related to
acquisition activity for the years ended  December 31, 2012  and 2011, was 
$3.27  and  $2.80, respectively. These include the  $348 million, or the
approximate  $0.17  per share, loss on early extinguishment of debt recognized
in the fourth quarter of 2012. Excluding the loss on early extinguishment of
debt, Adjusted EPS increased 22.8% in 2012 to  $3.43. GAAP earnings per diluted
share from continuing operations attributable to CVS Caremark for the year ended
 December 31, 2012, was  $3.03, which also includes the impact of the loss on
early extinguishment of debt, compared to  $2.59  in the prior year.

President and Chief Executive Officer  Larry Merlo, said, "I'm very pleased with
our fourth quarter results. Both the PBM and retail segments turned in strong
performances at the high end of our expectations. And we also realized
below-the-line benefits in the quarter from a lower effective tax rate and fewer
shares than we originally anticipated, resulting in EPS exceeding the high end
of our guidance by approximately  three cents  per share."

Mr. Merlo continued, "Additionally, we continued to drive shareholder value
through our disciplined approach to capital allocation.  We generated free cash
flow of  $5.2 billion  in 2012, exceeding our expectations, and returned more
than  $5.1 billion  to our shareholders through dividends and share
repurchases."



Real Estate Program

During the three months ended  December 31, 2012, the company opened 37 new
retail drugstores and closed two retail drugstores. In addition, the company
relocated eight retail drugstores. As of  December 31, 2012, the company
operated 7,525 locations in 45 states, the  District of Columbia  and  Puerto
Rico. These locations included 7,458 retail drugstores, 19 onsite pharmacies, 31
retail specialty pharmacy stores, 12 specialty mail order pharmacies and five
mail order pharmacies.  



Guidance



The company raised its earnings guidance for the full year 2013 to reflect the
anticipated  two cents  per share of EPS accretion related to the debt tender
and refinancing that was executed during the fourth quarter of last year. The
company currently expects to deliver Adjusted EPS of  $3.86 to $4.00  and GAAP
diluted earnings per share from continuing operations of  $3.61 to $3.75  per
share in 2013. The company confirmed its 2013 free cash flow guidance of  $4.8
billion to $5.1 billion, and its 2013 cash flow from operations guidance of 
$6.4 billion to $6.6 billion. These 2013 guidance estimates assume the
completion of  $4.0 billion  in share repurchases.  

Teleconference and Webcast

The company will be holding a conference call today for the investment community
at  8:30 am (EST)  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 more than 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 breath 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                          Year Ended                            
                                                                          December 31,                                December 31,                          
 In millions, except per share amounts                                    2012(1)                 2011              2012(1)              2011           
                                                                                                                                                        
 Net revenues                                                             $   31,394              $   28,317        $  123,133           $  107,100     
 Cost of revenues                                                         25,097                  22,762            100,627              86,539         
 Gross profit                                                             6,297                   5,555             22,506               20,561         
 Operating expenses                                                       3,995                   3,598             15,278               14,231         
 Operating profit                                                         2,302                   1,957             7,228                6,330          
 Interest expense, net                                                    159                     147               557                  584            
 Loss on early extinguishment of debt                                     348                     -                 348                  -              
 Income before income tax provision                                       1,795                   1,810             6,323                5,746          
 Income tax provision                                                     666                     711               2,441                2,258          
 Income from continuing operations                                        1,129                   1,099             3,882                3,488          
 Income (loss) from discontinued operations, net of tax                   -                       (36)              (7)                  (31)           
 Net income                                                               1,129                   1,063             3,875                3,457          
 Net loss attributable to noncontrolling interest                         -                       1                 2                    4              
 Net income attributable to CVS Caremark                                  $     1,129             $     1,064       $      3,877         $      3,461   
                                                                                                                                                        
 Income from continuing operations attributable to CVS Caremark:                                                                                        
 Income from continuing operations                                        $     1,129             $      1,099      $     3,882          $     3,488    
 Net loss attributable to noncontrolling interest                         -                       1                 2                    4              
 Income from continuing operations attributable to CVS Caremark           $    1,129              $     1,100       $     3,884          $     3,492    
                                                                                                                                                        
 Basic earnings per common share:                                         $      0.91             $        0.84     $       3.06         $        2.61  
 
  Income from continuing operations attributable to CVS Caremark                                                                                      
 Income (loss) from discontinued operations attributable to CVS Caremark  -                       (0.03)            (0.01)               (0.02)         
 Net income attributable to CVS Caremark                                  $      0.91             $       0.82      $      3.05          $        2.59  
 Weighted average basic common shares outstanding                         1,241                   1,302             1,271                1,338          
                                                                                                                                                        
 Diluted earnings per common share:                                       $        0.90           $         0.84    $       3.03         $       2.59   
 
Income from continuing operations attributable to CVS Caremark                                                                                        
 Income (loss) from discontinued operations attributable to CVS Caremark  -                       (0.03)            (0.01)               (0.02)         
 Net income attributable to CVS Caremark                                  $        0.90           $        0.81     $      3.03          $        2.57  
 Weighted average diluted common shares outstanding                       1,249                   1,310             1,280                1,347          
                                                                                                                                                        
 Dividends declared per common share                                      $   0.1625              $    0.1250       $  0.6500            $   0.5000     
                                                                                                                                                               
 (1) Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment. Additional details of the 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 September 30, 2012. 


 CVS CAREMARK CORPORATION                                                                                                                                                                                                                                 
 
Condensed Consolidated Balance Sheets                                                                                                                                                                                                                   
 
(Unaudited)                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                                          
                                                                                                                                                                                                          December 31,                                   
 In millions, except per share amounts                                                                                                                                                                    2012(1)                   2011               
 Assets:                                                                                                                                                                                                                                               
 Cash and cash equivalents                                                                                                                                                                                $           1,375         $           1,413  
 Short-term investments                                                                                                                                                                                   5                         5                  
 Accounts receivable, net                                                                                                                                                                                 6,473                     6,047              
 Inventories                                                                                                                                                                                              10,759                    10,046             
 Deferred income taxes                                                                                                                                                                                    663                       503                
 Other current assets                                                                                                                                                                                     577                       580                
 Total current assets                                                                                                                                                                                     19,852                    18,594             
 Property and equipment, net                                                                                                                                                                              8,632                     8,467              
 Goodwill                                                                                                                                                                                                 26,395                    26,458             
 Intangible assets, net                                                                                                                                                                                   9,753                     9,869              
 Other assets                                                                                                                                                                                             1,280                     1,155              
 Total assets                                                                                                                                                                                             $         65,912          $         64,543   
                                                                                                                                                                                                                                                       
 Liabilities:                                                                                                                                                                                                                                          
 Accounts payable                                                                                                                                                                                         $           5,070         $           4,370  
 Claims and discounts payable                                                                                                                                                                             3,974                     3,487              
 Accrued expenses                                                                                                                                                                                         4,051                     3,293              
 Short-term debt                                                                                                                                                                                          690                       750                
 Current portion of long-term debt                                                                                                                                                                        5                         56                 
 Total current liabilities                                                                                                                                                                                13,790                    11,956             
 Long-term debt                                                                                                                                                                                           9,133                     9,208              
 Deferred income taxes                                                                                                                                                                                    3,784                     3,853              
 Other long-term liabilities                                                                                                                                                                              1,501                     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; 1,667 shares issued and 1,231 shares outstanding at December 31, 2012 and 1,640 shares issued and 1,298 shares outstanding at December 31, 2011  17                        16                 
 Treasury stock, at cost: 435 shares at December 31, 2012 and 340 shares at December 31, 2011                                                                                                             (16,270)                  (11,953)           
 Shares held in trust: 1 share at December 31, 2012                                                                                                                                                       (31)                      (56)               
 
    and 2 shares at December 31, 2011                                                                                                                                                                                                                
 Capital surplus                                                                                                                                                                                          29,120                    28,126             
 Retained earnings                                                                                                                                                                                        25,049                    22,090             
 Accumulated other comprehensive loss                                                                                                                                                                     (181)                     (172)              
 Total shareholders' equity                                                                                                                                                                               37,704                    38,051             
 Total liabilities and shareholders' equity                                                                                                                                                               $         65,912          $         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 the 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 September 30, 2012. 


 CVS CAREMARK CORPORATION                                                                                                                   
 
Condensed Consolidated Statements of Cash Flows                                                                                           
 
(Unaudited)                                                                                                                               
                                                                                                                                            
                                                                                             Year Ended                                    
                                                                                             December 31,                                  
 In millions                                                                                 2012(1)                 2011                
 Cash flows from operating activities:                                                                                                   
 Cash receipts from customers                                                                $    113,205            $       97,688      
 Cash paid for inventory and prescriptions dispensed by retail network pharmacies            (90,032)                (75,148)            
 Cash paid to other suppliers and employees                                                  (13,643)                (13,635)            
 Interest received                                                                           4                       4                   
 Interest paid                                                                               (581)                   (647)               
 Income taxes paid                                                                           (2,282)                 (2,406)             
 Net cash provided by operating activities                                                   6,671                   5,856               
                                                                                                                                         
 Cash flows from investing activities:                                                                                                   
 Purchases of property and equipment                                                         (2,030)                 (1,872)             
 Proceeds from sale-leaseback transactions                                                   529                     592                 
 Proceeds from sale of property and equipment                                                23                      4                   
 Acquisitions (net of cash acquired) and other investments                                   (378)                   (1,441)             
 Purchase of available-for-sale investments                                                  -                       (3)                 
 Sale or maturity of available-for-sale investments                                          -                       60                  
 Proceeds from sale of subsidiary                                                            7                       250                 
 Net cash used in investing activities                                                       (1,849)                 (2,410)             
                                                                                                                                         
 Cash flows from financing activities:                                                                                                   
 Increase (decrease) in short-term debt                                                      (60)                    450                 
 Proceeds from issuance of long-term debt                                                    1,239                   1,463               
 Repayments of long-term debt                                                                (1,718)                 (2,122)             
 Purchase of noncontrolling interest in subsidiary                                           (26)                    -                   
 Dividends paid                                                                              (829)                   (674)               
 Derivative settlements                                                                      -                       (19)                
 Proceeds from exercise of stock options                                                     836                     431                 
 Excess tax benefits from stock-based compensation                                           28                      21                  
 Repurchase of common stock                                                                  (4,330)                 (3,001)             
 Other                                                                                       -                       (9)                 
 Net cash used in financing activities                                                       (4,860)                 (3,460)             
 Net decrease in cash and cash equivalents                                                   (38)                    (14)                
 Cash and cash equivalents at the beginning of the year                                      1,413                   1,427               
 Cash and cash equivalents at the end of the year                                            $        1,375          $            1,413  
 Reconciliation of net income to net cash provided by operating activities:                                                              
 Net income                                                                                  $         3,875         $         3,457     
 Adjustments required to reconcile net income to net cash provided by operating activities:                                              
 Depreciation and amortization                                                               1,753                   1,568               
 Stock-based compensation                                                                    132                     135                 
 Loss on early extinguishment of debt                                                        348                     -                   
 Gain on sale of subsidiary                                                                  -                       (53)                
 Deferred income taxes and other non-cash items                                              (106)                   144                 
 Change in operating assets and liabilities, net of effects of acquisitions:                                                             
 Accounts receivable, net                                                                    (387)                   (748)               
 Inventories                                                                                 (858)                   607                 
 Other current assets                                                                        3                       (420)               
 Other assets                                                                                (99)                    (49)                
 Accounts payable and claims and discounts payable                                           1,147                   1,128               
 Accrued expenses                                                                            753                     85                  
 Other long-term liabilities                                                                 110                     2                   
 Net cash provided by operating activities                                                   $         6,671         $         5,856     
                                                                                                                                            
 (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 September 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                        Year Ended                            
                                                                                      December 31,                              December 31,                          
 In millions, except per share amounts                                                2012                    2011            2012                  2011          
                                                                                                                                                                  
 Income before income tax provision(1)                                                $       1,795           $     1,810     $      6,323          $    5,746    
 Amortization                                                                         124                     114             486                   452           
 Adjusted income before income tax provision                                          1,919                   1,924           6,809                 6,198         
 Adjusted income tax provision(2)                                                     713                     756             2,628                 2,436         
 Adjusted income from continuing operations                                           1,206                   1,168           4,181                 3,762         
 Net loss attributable to noncontrolling interest                                     -                       1               2                     4             
 Adjusted income from continuing operations attributable to CVS Caremark              $      1,206            $     1,169     $      4,183          $    3,766    
 Weighted average diluted common shares outstanding                                   1,249                   1,310           1,280                 1,347         
 Adjusted earnings per share from continuing operations attributable to CVS Caremark  $        0.97           $       0.89    $        3.27         $       2.80  
                                                                                                                                                                         
 (1) Includes a $348 million loss on early extinguishment of debt (approximately $0.17 per diluted share) in the fourth quarter of 2012.                                 
                                                                                                                                                                         
 (2) The adjusted income tax provision is computed using the effective income tax rates of 37.11% and 38.6% from the consolidated statements of income for the three months and year ended December 31, 2012. 


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:

                                                    Year Ended                           
                                                    December 31,                         
 In millions                                        2012                 2011          
                                                                                       
 Net cash provided by operating activities          $      6,671         $     5,856   
 Subtract:  Additions to property and equipment     (2,030)              (1,872)       
 Add:  Proceeds from sale-leaseback transactions    529                  592           
 Free cash flow                                     $     5,170          $      4,576  
                                                                                       


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:

 In millions              Pharmacy Services       Retail Pharmacy Segment    Corporate  Segment    Intersegment Eliminations(2)    Consolidated    
                          
Segment(1)                                                                                              
Totals         
                                                                                                                                                   
 Three Months Ended                                                                                                                                
 December 31, 2012:       $             18,642    $          16,280          $          -          $            (3,528)            $       31,394  
 
    Net revenues                                                                                                                                 
 Gross profit             1,334                   5,095                      -                     (132)                           6,297           
 Operating profit (loss)  1,035                   1,581                      (182)                 (132)                           2,302           
 December 31, 2011:       15,874                  15,493                     -                     (3,050)                         28,317          
 
    Net revenues                                                                                                                                 
 Gross profit             1,016                   4,608                      -                     (69)                            5,555           
 Operating profit (loss)  724                     1,453                      (151)                 (69)                            1,957           
 Year Ended                                                                                                                                        
 December 31, 2012:       73,444                  63,654                     -                     (13,965)                        123,133         
 
    Net revenues                                                                                                                                 
 Gross profit             3,808                   19,109                     -                     (411)                           22,506          
 Operating profit (loss)  2,679                   5,654                      (694)                 (411)                           7,228           
 December 31, 2011:       58,874                  59,599                     -                     (11,373)                        107,100         
 
    Net revenues                                                                                                                                 
 Gross profit             3,279                   17,468                     -                     (186)                           20,561          
 Operating profit (loss)  2,220                   4,912                      (616)                 (186)                           6,330           
                                                                                                                                                            
 (1) Net revenues of the Pharmacy Services segment include approximately $2.0 billion of retail co-payments for both the three months ended December 31, 2012 and 2011, as well as $8.4 billion and $7.9 billion of retail co-payments for the year ended December 31, 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 $888 million and $742 million for the three months ended December 31, 2012 and 2011, respectively, and $3.4 billion and $2.6 billion for the year ended December 31, 2012 and 2011, respectively; gross profit and operating profit of $132 million and $69 million for the three months ended December 31, 2012 and 2011, respectively, and $411 million and $186 million for the year ended December 31, 2012 and 2011, respectively. 


Supplemental Information
(Unaudited)

Pharmacy Services Segment

The following table summarizes the Pharmacy Services segment's performance for
the respective periods:

                                      Three Months Ended               Year Ended                     
                                      December 31,                     December 31,                   
 In millions                          2012               2011        2012             2011        
                                                                                                  
 Net revenues                         $ 18,642           $ 15,874    $ 73,444         $   58,874  
 Gross profit                         1,334              1,016       3,808            3,279       
 Gross profit % of net revenues       7.2%               6.4%        5.2%             5.6%        
 Operating expenses                   299                292         1,129            1,059       
 Operating expense % of net revenues  1.6%               1.8%        1.5%             1.8%        
 Operating profit                     1,035              724         2,679            2,220       
 Operating profit % of net revenues   5.6%               4.6%        3.7%             3.8%        
                                                                                                  
 Net revenues(1):                                                                                 
 Mail choice(2)                       $ 5,759            $  4,901    $ 22,843         $  18,616   
 Pharmacy network(3)                  12,838             10,924      50,411           40,040      
 Other                                45                 49          190              218         
 Pharmacy claims processed(1):                                                                    
 Total                                225.9              210.8       880.5            774.6       
 Mail choice(2)                       20.4               17.8        81.7             70.6        
 Pharmacy network(3)                  205.5              193.0       798.8            704.0       
 Generic dispensing rate(1):                                                                      
 Total                                80.0%              75.0%       78.5%            74.1%       
 Mail choice(2)                       74.5%              66.1%       72.0%            64.9%       
 Pharmacy network(3)                  80.5%              75.8%       79.1%            75.0%       
 Mail choice penetration rate         22.1%              20.8%       22.7%            22.3%       
                                                                                                         
 (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 include 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, but excluding Maintenance Choice activity. 


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                    Year Ended                          
                                                 December 31,                          December 31,                        
 In millions, except per adjusted claim amounts  2012                2011            2012                  2011        
                                                                                                                       
 Operating profit                                $  1,035            $      724      $      2,679          $  2,220    
 Depreciation and amortization                   137                 116             517                   433         
 EBITDA                                          1,172               840             3,196                 2,653       
 Adjusted claims                                 264.0               243.9           1,033.0               905.6       
 EBITDA per adjusted claim                       $    4.44           $       3.45    $        3.09         $     2.93  


Supplemental Information
(Unaudited)
Retail Pharmacy Segment

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

                                                  Three Months Ended             Year Ended                 
                                                  December 31,                   December 31,               
 In millions                                      2012              2011       2012            2011     
                                                                                                        
 Net revenues                                     $16,280           $15,493    $63,654         $59,599  
 Gross profit                                     5,095             4,608      19,109          17,468   
 Gross profit % of net revenues                   31.3%             29.7%      30.0%           29.3%    
 Operating expenses                               3,514             3,155      13,455          12,556   
 Operating expense % of net revenues              21.6%             20.4%      21.1%           21.1%    
 Operating profit                                 1,581             1,453      5,654           4,912    
 Operating profit % of net revenues               9.7%              9.4%       8.9%            8.2%     
                                                                                                        
 Retail prescriptions filled (90 Day = 1Rx)       185.5             168.9      717.9           657.8    
 Retail prescriptions filled (90 Day = 3 Rx) (1)  219.7             197.1      848.1           763.4    
 Net revenue increase:                                                                                  
 Total                                            5.1%              4.0%       6.8%            3.9%     
 Pharmacy                                         4.9%              4.9%       7.6%            4.4%     
 Front store                                      5.5%              2.1%       5.1%            3.0%     
 Total prescription volume (90 Day = 1 Rx)        9.8%              3.2%       9.1%            3.4%     
 Total prescription volume (90 Day = 3 Rx) (1)    11.5%             5.4%       11.1%           5.6%     
 Same store increase:                                                                                   
 Total sales                                      4.0%              2.5%       5.5%            2.3%     
 Pharmacy sales                                   4.0%              3.6%       6.5%            3.1%     
 Front store sales                                3.9%              0.1%       3.4%            0.8%     
 Prescription volume (90 Day = 1 Rx)              9.0%              2.1%       8.1%            2.2%     
 Prescription volume (90 Day = 3 Rx) (1)          11.0%             4.4%       10.3%           4.4%     
 Generic dispensing rate                          79.9%             75.9%      79.2%           75.6%    
 Pharmacy % of total revenues                     67.6%             67.7%      68.8%           68.3%    
 Third party % of pharmacy revenue                97.6%             97.9%      97.5%           97.8%    
                                                                                                        
 (1) Includes the adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription. 


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, 2013                      
                                                                                                                           
 Income before income tax provision                                                   $       7,188           $    7,444   
 Amortization                                                                         485                     485          
 Adjusted income before income tax provision                                          7,673                   7,929        
 Adjusted income tax provision                                                        2,985                   3,084        
 Adjusted income from continuing operations                                           4,688                   4,845        
 Net loss attributable to noncontrolling interest                                     -                       -            
 Adjusted income from continuing operations attributable to CVS Caremark              $      4,688            $    4,845   
 Weighted average diluted common shares outstanding                                   1,215                   1,211        
 Adjusted earnings per share from continuing operations attributable to CVS Caremark  $         3.86          $      4.00  


                                                                                      Three Months Ending                     
 In millions, except per share amounts                                                March 31, 2013                          
                                                                                                                            
 Income before income tax provision                                                   $       1,442            $    1,502   
 Amortization                                                                         120                      120          
 Adjusted income before income tax provision                                          1,562                    1,622        
 Adjusted income tax provision                                                        609                      633          
 Adjusted income from continuing operations                                           953                      989          
 Net loss attributable to noncontrolling interest                                     -                        -            
 Adjusted income from continuing operations attributable to CVS Caremark              $         953            $       989  
 Weighted average diluted common shares outstanding                                   1,240                    1,237        
 Adjusted earnings per share from continuing operations attributable to CVS Caremark  $         0.77           $      0.80  


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, 2013                          
                                                                                           
 Net cash provided by operating activities        $       6,350          $          6,649  
 Subtract:  Additions to property and equipment   (2,050)                (2,149)           
 Add:  Proceeds from sale-leaseback transactions  500                    600               
 Free cash flow                                   $       4,800          $          5,100  


SOURCE  CVS Caremark Corporation


Investors, Nancy Christal, Senior Vice President, Investor Relations,
+1-914-722-4704; Media, Eileen H. Boone, Senior Vice President, Corporate
Communications & Community Relations, +1-401-770-4561

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