WOONSOCKET, R.I., Feb. 9,
2016 /PRNewswire/ --
Fourth Quarter Year-over-year Highlights:
- Net revenues increased 11.0% to a record $41.1 billion
- Operating profit increased 17.6% to $2.7 billion
- GAAP diluted EPS from continuing operations of $1.34
- Adjusted EPS of $1.53, an
increase of 26.5%, excluding certain items (amortization,
transaction and integration costs, and a $90
million charge related to a disputed 1999 legal
settlement)
Full Year Highlights:
- Net revenues increased 10.0% to a record $153.3 billion
- Operating profit increased 7.4% to $9.5 billion
- GAAP diluted EPS from continuing operations of $4.62
- Adjusted EPS of $5.16, an
increase of 14.8%, excluding certain items (amortization, bridge
financing costs, transaction and integration costs, a $90 million charge related to a disputed 1999
legal settlement, and the 2014 loss on early extinguishment of
debt)
- Generated free cash flow of $6.5
billion; cash flow from operations of $8.4 billion
2016 Guidance:
- Confirmed full year Adjusted EPS of $5.73 to $5.88 excluding amortization; GAAP
diluted EPS from continuing operations of $5.28 to $5.43; both exclude acquisition-related
integration costs
- Confirmed first quarter Adjusted EPS of $1.14 to $1.17 excluding amortization; GAAP
diluted EPS from continuing operations of $1.03 to $1.06; both exclude acquisition-related
integration costs
- Confirmed full year free cash flow of $5.3 to $5.6 billion and cash flow from
operations of $7.6 to $7.9
billion
CVS Health Corporation (NYSE: CVS) today announced operating
results for the three months and year ended December 31,
2015.
Revenues
Net revenues for the three months ended December 31, 2015
increased 11.0%, or $4.1 billion to
$41.1 billion, up from $37.1 billion in the three months ended
December 31, 2014. For the year ended December 31, 2015,
total net revenues increased 10.0%, or $13.9
billion to $153.3 billion,
compared to $139.4 billion for the
year ended December 31, 2014.
Revenues in the Pharmacy Services Segment increased 11.1% to
$26.5 billion in the three months
ended December 31, 2015. This increase was primarily driven by
growth in specialty pharmacy, which includes the impact of the
Omnicare, Inc. ("Omnicare") acquisition in August 2015, and pharmacy network claims.
Pharmacy network claims processed during the three months ended
December 31, 2015, increased 7.2% to 237.4 million, compared
to 221.6 million in the prior year period. The increase in pharmacy
network claim volume was primarily due to net new business. Mail
choice claims processed during the three months ended
December 31, 2015 increased approximately 3.9% to 22.2
million, compared to 21.3 million in the prior year period. The
increase in the mail choice claim volume was primarily driven by
specialty and continued adoption of our Maintenance
Choice® offerings, partially offset by a decline in
traditional mail volume. For the year ended December 31, 2015,
total net revenues in the Pharmacy Services Segment increased 13.5%
to $100.4 billion, compared to
$88.4 billion in the year ended
December 31, 2014.
Revenues in the Retail/LTC Segment increased 12.5% to
$19.9 billion in the three months
ended December 31, 2015. Approximately half of the increase
was driven by the addition of long-term care ("LTC") operations
acquired as part of the Omnicare acquisition. Same store sales
increased 3.5% over the prior year period, with pharmacy same store
sales up 5.0% and front store same store sales down 0.5%. Front
store same store sales were negatively impacted by softer customer
traffic, partially offset by an increase in basket size. Pharmacy
same store prescription volumes rose 5.0% on a 30-day equivalent
basis. Pharmacy same store sales were negatively impacted by
approximately 470 basis points due to recent generic introductions.
For the year ended December 31, 2015, total net revenues in
the Retail/LTC Segment increased 6.2% to $72.0 billion, compared to $67.8 billion in the year ended December 31,
2014. Same store sales increased 1.7% for the year ended
December 31, 2015, over the prior year, with pharmacy same
store sales up 4.5% and front store same store sales down 5.0%.
Front store same store sales would have been approximately 520
basis points higher if tobacco and the estimated associated basket
sales were excluded from the year ended December 31, 2014.
For the three months ended December 31, 2015, the generic
dispensing rate increased approximately 165 basis points to 83.7%
in our Pharmacy Services Segment and increased approximately 155
basis points to 84.0% in our Retail/LTC Segment, compared to the
prior year.
Operating Profit and Income from Continuing
Operations
For the three months ended December 31,
2015, operating profit increased $243
million in the Pharmacy Services Segment and $299 million in the Retail/LTC Segment. The
Pharmacy Services Segment operating profit grew 26.8% and the
Retail/LTC Segment operating profit grew 19.8%(1),
excluding acquisition-related integration costs of $52 million. Both segments benefited from the
Omnicare acquisition, increased generic drugs dispensing rates and
favorable purchasing economics. The Pharmacy Services Segment was
also positively affected by growth in specialty pharmacy and
pharmacy network volume, partially offset by client price
compression. The Retail/LTC Segment was also positively affected by
increased sales, an improved front store margin rate, partially
offset by continued reimbursement pressure. The Corporate Segment
includes $20 million of
acquisition-related transaction and integration costs for the three
months ended December 31, 2015,
related to the acquisition of Omnicare and the acquisition of the
pharmacies and clinics of Target Corporation ("Target"), as well as
a $90 million charge related to a
legacy lawsuit challenging the 1999 settlement by MedPartners of
various securities class actions and a related derivative
claim.
For the year ended December 31,
2015, operating profit increased by $475 million in the Pharmacy Services Segment and
by $368 million in the Retail/LTC
Segment. The Pharmacy Services Segment grew 13.5% and the
Retail/LTC Segment grew 6.4%(1), excluding
acquisition-related integration costs of $64
million. The drivers of the increases are the same as those
described for the three months ended December 31, 2015 above. The Corporate Segment
includes $156 million of
acquisition-related transaction and integration costs for the year
ended December 31, 2015 related to
the acquisition of Omnicare and the acquisition of the pharmacies
and clinics of Target, as well as the $90
million legal charge.
Income from continuing operations for the three months ended
December 31, 2015 was $1.5
billion, an increase of $178
million or 13.4%, compared to the prior year. Income from
continuing operations for the year ended December 31, 2015 was
$5.2 billion, an increase of
$585 million or 12.6%, compared to
the prior year.
Adjusted earnings per share ("Adjusted EPS") for the three
months ended December 31, 2015 and 2014, was $1.53 and $1.21,
respectively, an increase of 26.5%. Adjusted EPS excludes
$191 million and $128 million of intangible asset amortization for
the three months ended December 31, 2015 and 2014,
respectively. Adjusted EPS also excludes $72
million of acquisition-related transaction and integration
costs and the $90 million legal
charge. GAAP earnings per diluted share ("GAAP EPS") for the three
months ended December 31, 2015 was $1.34, compared to $1.14 in the prior year.
Adjusted EPS for the years ended December
31, 2015 and 2014, was $5.16
and $4.49, respectively, an increase
of 14.8%. Adjusted EPS excludes $611
million and $518 million of
intangible asset amortization for the years ended December 31,
2015 and 2014, respectively. Adjusted EPS in 2015 also excludes
$272 million of acquisition-related
bridge financing, transaction and integration costs and the
$90 million legal charge, and in 2014
excludes the loss on early extinguishment of debt. GAAP EPS for the
year ended December 31, 2015 was
$4.62, compared to $3.96 in the prior year.
President and CEO Larry Merlo,
stated, "We enjoyed a successful year in 2015, highlighted by
excellent performance across our enterprise and two key
acquisitions that support our strategy for growth. We grew our core
business with the acquisition of Target's pharmacies and clinics
and expanded our reach with the acquisition of Omnicare, the leader
in long-term care pharmacy. At the same time, we achieved
solid year-over-year growth in revenues, operating profit, and
earnings per share. We also generated $6.4
billion in free cash flow for the full-year, exceeding our
expectations. Through dividends and share repurchases, we returned
more than $6 billion to our
shareholders in 2015. As expected, growth in the fourth quarter was
especially strong, with revenues increasing 11% and Adjusted EPS
increasing 26.5%, right in line with our guidance."
Mr. Merlo continued, "We continue to win and gain share across
our businesses and I'm very pleased with the outstanding PBM
selling season we had for 2016, with gross client wins of
$14.8 billion. Our growth in the
fast-growing specialty market continues to outpace the industry.
Overall, our leadership in multiple competencies enables us to
provide superior value for patients, payors, and providers. We
firmly believe that we have the right strategy for success in the
evolving health care marketplace."
Guidance
The Company confirmed its previous guidance for the full year
and first quarter of 2016. The Company expects to deliver Adjusted
EPS of $5.73 to $5.88 and GAAP
diluted earnings per share from continuing operations of
$5.28 to $5.43 in 2016. The
Company also confirmed its first quarter Adjusted EPS guidance of
$1.14 to $1.17 and GAAP diluted
earnings per share from continuing operations of $1.03 to $1.06. Adjusted EPS excludes intangible
asset amortization and guidance also excludes the affect of
acquisition-related integration costs that are expected to occur
during 2016. The Company confirmed its 2016 free cash flow guidance
of $5.3 to $5.6 billion, and its 2015
cash flow from operations guidance of $7.6
to $7.9 billion. These 2016 guidance estimates assume the
completion of $4.0 billion in share
repurchases.
Real Estate Program
During the three months ended December 31, 2015, the
Company opened 53 new retail stores, acquired 1,672 pharmacies and
closed 14 retail stores. In addition, the Company relocated 19
retail stores. As of December 31, 2015, the Company operated
9,655 retail stores, including pharmacies in Target stores, in 49
states, the District of Columbia,
Puerto Rico and Brazil.
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 and annual results. An audio webcast of
the call will be broadcast simultaneously for all interested
parties through the Investor Relations section of the CVS Health
website at http://investors.cvshealth.com. This webcast will be
archived and available on the website for a one-year period
following the conference call.
About CVS Health
CVS Health is a pharmacy innovation company helping people on
their path to better health. Through its approximately 9,600 retail
pharmacies, more than 1,100 walk-in medical clinics, a leading
pharmacy benefits manager with more than 75 million plan members, a
dedicated senior pharmacy care business serving more than one
million patients per year, and expanding specialty pharmacy
services, the Company enables people, businesses and communities to
manage health in more affordable and effective ways. This unique
integrated model increases access to quality care, delivers better
health outcomes and lowers overall health care costs. Find more
information about how CVS Health is shaping the future of health
at https://www.cvshealth.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. By their nature, all
forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by the
forward-looking statements for a number of reasons as described in
our Securities and Exchange Commission filings, including those set
forth in the Risk Factors section and under the section entitled
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K and Quarterly
Report on Form 10-Q.
|
(1)
|
Excluding $52 million
of acquisition-related integration costs, operating profit for the
Retail/LTC Segment increased $351 million, or 19.8%, from $1,780
million for the three months ended December 31, 2014 to $2,131
million for the three months ended December 31, 2015. Excluding $64
million of acquisition-related integration costs, operating profit
for the Retail/LTC Segment increased $432 million, or 6.4%, from
$6,762 million for the year ended December 31, 2014 to $7,194
million for the year ended December 31, 2015.
|
|
— Tables Follow
—
|
|
|
CVS HEALTH
CORPORATION
|
|
Condensed
Consolidated Statements of Income
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
In millions, except per share amounts
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net
revenues
|
|
$
|
41,145
|
|
|
$
|
37,055
|
|
|
$
|
153,290
|
|
|
$
|
139,367
|
|
|
Cost of
revenues
|
|
33,844
|
|
|
30,422
|
|
|
126,762
|
|
|
114,000
|
|
|
Gross
profit
|
|
7,301
|
|
|
6,633
|
|
|
26,528
|
|
|
25,367
|
|
|
Operating
expenses
|
|
4,572
|
|
|
4,312
|
|
|
17,074
|
|
|
16,568
|
|
|
Operating
profit
|
|
2,729
|
|
|
2,321
|
|
|
9,454
|
|
|
8,799
|
|
|
Interest expense,
net
|
|
276
|
|
|
131
|
|
|
838
|
|
|
600
|
|
|
Loss on early
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
Income before income
tax provision
|
|
2,453
|
|
|
2,190
|
|
|
8,616
|
|
|
7,678
|
|
|
Income tax
provision
|
|
953
|
|
|
868
|
|
|
3,386
|
|
|
3,033
|
|
|
Income from
continuing operations
|
|
1,500
|
|
|
1,322
|
|
|
5,230
|
|
|
4,645
|
|
|
Income (loss) from
discontinued operations, net of tax
|
|
(1)
|
|
|
(1)
|
|
|
9
|
|
|
(1)
|
|
|
Net income
|
|
1,499
|
|
|
1,321
|
|
|
5,239
|
|
|
4,644
|
|
|
Net income
attributable to noncontrolling interest
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
Net income
attributable to CVS Health
|
|
$
|
1,498
|
|
|
$
|
1,321
|
|
|
$
|
5,237
|
|
|
$
|
4,644
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations attributable to CVS Health:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
1,500
|
|
|
$
|
1,322
|
|
|
$
|
5,230
|
|
|
$
|
4,645
|
|
|
Net income
attributable to noncontrolling interest
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
Income from
continuing operations attributable to CVS Health
|
|
$
|
1,499
|
|
|
$
|
1,322
|
|
|
$
|
5,228
|
|
|
$
|
4,645
|
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations attributable to CVS Health
|
|
$
|
1.35
|
|
|
$
|
1.15
|
|
|
$
|
4.65
|
|
|
$
|
3.98
|
|
|
Income from
discontinued operations attributable to CVS Health
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
—
|
|
|
Net income
attributable to CVS Health
|
|
$
|
1.35
|
|
|
$
|
1.15
|
|
|
$
|
4.66
|
|
|
$
|
3.98
|
|
|
Weighted average
basic shares outstanding
|
|
1,107
|
|
|
1,143
|
|
|
1,118
|
|
|
1,161
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations attributable to CVS Health
|
|
$
|
1.34
|
|
|
$
|
1.14
|
|
|
$
|
4.62
|
|
|
$
|
3.96
|
|
|
Income from
discontinued operations attributable to CVS Health
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
—
|
|
|
Net income
attributable to CVS Health
|
|
$
|
1.34
|
|
|
$
|
1.14
|
|
|
$
|
4.63
|
|
|
$
|
3.96
|
|
|
Weighted average
diluted shares outstanding
|
|
1,114
|
|
|
1,152
|
|
|
1,126
|
|
|
1,169
|
|
|
Dividends declared
per share
|
|
$
|
0.35
|
|
|
$
|
0.275
|
|
|
$
|
1.40
|
|
|
$
|
1.10
|
|
|
CVS HEALTH
CORPORATION
|
|
Condensed
Consolidated Balance Sheets
|
|
(Unaudited)
|
|
|
|
|
|
December 31,
|
|
In millions, except per share amounts
|
|
2015
|
|
2014
|
|
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
2,459
|
|
|
$
|
2,481
|
|
|
Short-term
investments
|
|
88
|
|
|
34
|
|
|
Accounts receivable,
net
|
|
11,888
|
|
|
9,687
|
|
|
Inventories
|
|
14,001
|
|
|
11,930
|
|
|
Deferred income
taxes
|
|
1,220
|
|
|
985
|
|
|
Other current
assets
|
|
722
|
|
|
866
|
|
|
Total current
assets
|
|
30,378
|
|
|
25,983
|
|
|
Property and
equipment, net
|
|
9,855
|
|
|
8,843
|
|
|
Goodwill
|
|
38,106
|
|
|
28,142
|
|
|
Intangible assets,
net
|
|
13,878
|
|
|
9,774
|
|
|
Other
assets
|
|
1,440
|
|
|
1,445
|
|
|
Total
assets
|
|
$
|
93,657
|
|
|
$
|
74,187
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
7,490
|
|
|
$
|
6,547
|
|
|
Claims and discounts
payable
|
|
7,653
|
|
|
5,404
|
|
|
Accrued
expenses
|
|
6,829
|
|
|
5,816
|
|
|
Short-term
debt
|
|
—
|
|
|
685
|
|
|
Current portion of
long-term debt
|
|
1,197
|
|
|
575
|
|
|
Total current
liabilities
|
|
23,169
|
|
|
19,027
|
|
|
Long-term
debt
|
|
26,267
|
|
|
11,630
|
|
|
Deferred income
taxes
|
|
5,437
|
|
|
4,036
|
|
|
Other long-term
liabilities
|
|
1,542
|
|
|
1,531
|
|
|
Commitments and
contingencies
|
|
—
|
|
|
—
|
|
|
Redeemable
noncontrolling interest
|
|
39
|
|
|
—
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
CVS Health
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; 1,699 shares issued
and
|
|
|
|
|
|
1,101 shares
outstanding at December 31, 2015 and 1,691 shares issued and
1,140
|
|
|
|
|
|
shares outstanding at
December 31, 2014
|
|
17
|
|
|
17
|
|
|
Treasury stock, at
cost: 597 shares at December 31, 2015 and 550
shares
|
|
|
|
|
|
at December 31,
2014
|
|
(28,886)
|
|
|
(24,078)
|
|
|
Shares held in trust:
1 share at December 31, 2015 and 2014
|
|
(31)
|
|
|
(31)
|
|
|
Capital
surplus
|
|
30,948
|
|
|
30,418
|
|
|
Retained
earnings
|
|
35,506
|
|
|
31,849
|
|
|
Accumulated other
comprehensive income (loss)
|
|
(358)
|
|
|
(217)
|
|
|
Total CVS Health
shareholders' equity
|
|
37,196
|
|
|
37,958
|
|
|
Noncontrolling
interest
|
|
7
|
|
|
5
|
|
|
Total shareholders'
equity
|
|
37,203
|
|
|
37,963
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
93,657
|
|
|
$
|
74,187
|
|
|
CVS HEALTH
CORPORATION
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
(Unaudited)
|
|
|
|
|
|
Year Ended
December 31,
|
|
In millions
|
|
2015
|
|
2014
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
Cash receipts from
customers
|
|
$
|
148,954
|
|
|
$
|
132,406
|
|
|
Cash paid for
inventory and prescriptions dispensed by retail network
pharmacies
|
|
(122,498)
|
|
|
(105,362)
|
|
|
Cash paid to other
suppliers and employees
|
|
(14,162)
|
|
|
(15,344)
|
|
|
Interest
received
|
|
21
|
|
|
15
|
|
|
Interest
paid
|
|
(629)
|
|
|
(647)
|
|
|
Income taxes
paid
|
|
(3,274)
|
|
|
(2,931)
|
|
|
Net cash provided by
operating activities
|
|
8,412
|
|
|
8,137
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(2,367)
|
|
|
(2,136)
|
|
|
Proceeds from
sale-leaseback transactions
|
|
411
|
|
|
515
|
|
|
Proceeds from sale of
property and equipment and other assets
|
|
35
|
|
|
11
|
|
|
Acquisitions (net of
cash acquired) and other investments
|
|
(11,475)
|
|
|
(2,439)
|
|
|
Purchase of
available-for-sale investments
|
|
(267)
|
|
|
(157)
|
|
|
Maturity of
available-for-sale investments
|
|
243
|
|
|
161
|
|
|
Net cash used in
investing activities
|
|
(13,420)
|
|
|
(4,045)
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
(Decrease) increase
in short-term debt
|
|
(685)
|
|
|
685
|
|
|
Proceeds from
issuance of long-term debt
|
|
14,805
|
|
|
1,483
|
|
|
Repayments of
long-term debt
|
|
(2,902)
|
|
|
(3,100)
|
|
|
Payment of contingent
consideration
|
|
(58)
|
|
|
—
|
|
|
Dividends
paid
|
|
(1,576)
|
|
|
(1,288)
|
|
|
Proceeds from
exercise of stock options
|
|
299
|
|
|
421
|
|
|
Excess tax benefits
from stock-based compensation
|
|
127
|
|
|
106
|
|
|
Repurchase of common
stock
|
|
(5,001)
|
|
|
(4,001)
|
|
|
Other
|
|
(3)
|
|
|
—
|
|
|
Net cash provided by
(used in) financing activities
|
|
5,006
|
|
|
(5,694)
|
|
|
Effect of exchange
rates on cash
|
|
(20)
|
|
|
(6)
|
|
|
Net decrease in cash
and cash equivalents
|
|
(22)
|
|
|
(1,608)
|
|
|
Cash and cash
equivalents at the beginning of the year
|
|
2,481
|
|
|
4,089
|
|
|
Cash and cash
equivalents at the end of the year
|
|
$
|
2,459
|
|
|
$
|
2,481
|
|
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
5,239
|
|
|
$
|
4,644
|
|
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
2,092
|
|
|
1,931
|
|
|
Stock-based
compensation
|
|
230
|
|
|
165
|
|
|
Loss on early
extinguishment of debt
|
|
—
|
|
|
521
|
|
|
Deferred income taxes
and other non-cash items
|
|
(266)
|
|
|
(58)
|
|
|
Change in operating
assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
Accounts receivable,
net
|
|
(1,594)
|
|
|
(737)
|
|
|
Inventories
|
|
(1,141)
|
|
|
(770)
|
|
|
Other current
assets
|
|
355
|
|
|
(383)
|
|
|
Other
assets
|
|
2
|
|
|
9
|
|
|
Accounts payable and
claims and discounts payable
|
|
2,834
|
|
|
1,742
|
|
|
Accrued
expenses
|
|
765
|
|
|
1,060
|
|
|
Other long-term
liabilities
|
|
(104)
|
|
|
13
|
|
|
Net cash provided by
operating activities
|
|
$
|
8,412
|
|
|
$
|
8,137
|
|
|
Adjusted Earnings
Per Share
|
|
(Unaudited)
|
|
|
The Company is
providing non-GAAP information that excludes certain items because
of the nature of these items and the impact they have on the
analysis of underlying business performance and trends. Management
believes that providing this information enhances investors'
understanding of the Company's performance. This information should
be considered in addition to, but not in lieu of, information
prepared in accordance with GAAP.
|
|
|
The following is a
reconciliation of income before income tax provision to Adjusted
earnings per share:
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
In millions, except per share amounts
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Income before income
tax provision
|
|
$
|
2,453
|
|
|
$
|
2,190
|
|
|
$
|
8,616
|
|
|
$
|
7,678
|
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
191
|
|
|
128
|
|
|
611
|
|
|
518
|
|
|
Acquisition-related
bridge financing costs(1)
|
|
—
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
Acquisition-related
transaction and integration costs(1)
|
|
72
|
|
|
—
|
|
|
220
|
|
|
—
|
|
|
Charge related to a
disputed 1999 legal settlement
|
|
90
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
Loss on early
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
Adjusted income
before income tax provision
|
|
2,806
|
|
|
2,318
|
|
|
9,589
|
|
|
8,717
|
|
|
Adjusted income tax
provision
|
|
1,093
|
|
|
919
|
|
|
3,750
|
|
|
3,444
|
|
|
Adjusted income from
continuing operations
|
|
1,713
|
|
|
1,399
|
|
|
5,839
|
|
|
5,273
|
|
|
Net income
attributable to noncontrolling interest
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
Income allocable to
participating securities
|
|
(8)
|
|
|
(6)
|
|
|
(27)
|
|
|
(19)
|
|
|
Adjusted income from
continuing operations attributable to CVS Health
|
|
$
|
1,704
|
|
|
$
|
1,393
|
|
|
$
|
5,810
|
|
|
$
|
5,254
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
1,114
|
|
|
1,152
|
|
|
1,126
|
|
|
1,169
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
share
|
|
$
|
1.53
|
|
|
$
|
1.21
|
|
|
$
|
5.16
|
|
|
$
|
4.49
|
|
|
|
(1) Costs
associated with the acquisitions of Omnicare and the pharmacies and
clinics of Target.
|
|
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
|
|
2015
|
|
2014
|
|
Net cash provided by
operating activities(1)
|
|
$
|
8,412
|
|
|
$
|
8,137
|
|
|
Subtract: Additions
to property and equipment
|
|
(2,367)
|
|
|
(2,136)
|
|
|
Add: Proceeds from
sale-leaseback transactions
|
|
411
|
|
|
515
|
|
|
Free cash
flow
|
|
$
|
6,456
|
|
|
$
|
6,516
|
|
|
|
(1) Cash provided
by operating activities for the year ended December 31, 2015
includes $52 million of pre-tax acquisition-related bridge
financing costs and $220 million of pre-tax acquisition-related
transaction and integration costs.
|
|
Supplemental
Information
|
|
(Unaudited)
|
|
|
The Company evaluates
its Pharmacy Services and Retail/LTC segment performance based on
net revenues, 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
Segment(1)
|
|
Retail/LTC
Segment
|
|
Corporate
Segment
|
|
Intersegment
Eliminations(2)
|
|
Consolidated
Totals
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015:
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
26,514
|
|
|
$
|
19,903
|
|
|
$
|
—
|
|
|
$
|
(5,272)
|
|
|
$
|
41,145
|
|
|
Gross
profit
|
|
1,492
|
|
|
6,002
|
|
|
—
|
|
|
(193)
|
|
|
7,301
|
|
|
Operating profit
(loss)(3)
|
|
1,152
|
|
|
2,079
|
|
|
(325)
|
|
|
(177)
|
|
|
2,729
|
|
|
December 31,
2014:
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
23,874
|
|
|
17,698
|
|
|
—
|
|
|
(4,517)
|
|
|
37,055
|
|
|
Gross
profit
|
|
1,238
|
|
|
5,558
|
|
|
—
|
|
|
(163)
|
|
|
6,633
|
|
|
Operating profit
(loss)
|
|
909
|
|
|
1,780
|
|
|
(205)
|
|
|
(163)
|
|
|
2,321
|
|
|
Year
Ended
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015:
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
100,363
|
|
|
72,007
|
|
|
—
|
|
|
(19,080)
|
|
|
153,290
|
|
|
Gross
profit
|
|
5,227
|
|
|
21,992
|
|
|
—
|
|
|
(691)
|
|
|
26,528
|
|
|
Operating profit
(loss)(3)
|
|
3,989
|
|
|
7,130
|
|
|
(1,037)
|
|
|
(628)
|
|
|
9,454
|
|
|
December 31,
2014:
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
88,440
|
|
|
67,798
|
|
|
—
|
|
|
(16,871)
|
|
|
139,367
|
|
|
Gross
profit
|
|
4,771
|
|
|
21,277
|
|
|
—
|
|
|
(681)
|
|
|
25,367
|
|
|
Operating profit
(loss)(3)
|
|
3,514
|
|
|
6,762
|
|
|
(796)
|
|
|
(681)
|
|
|
8,799
|
|
|
|
(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 December 31, 2015 and 2014, respectively, as well
as $8.9 billion and $8.1 billion of retail co-payments for the year
ended December 31, 2015 and 2014, respectively.
|
|
(2)
Intersegment eliminations relate to intersegment revenue generating
activities that occur between the Pharmacy Services Segment and the
Retail/LTC Segment. These occur in the following ways: when members
of Pharmacy Services Segment clients ("members") fill prescriptions
at retail stores to purchase covered products, when members
enrolled in programs such as Maintenance Choice® elect
to pick up maintenance prescriptions at a retail drugstore instead
of receiving them through the mail, or when members have
prescriptions filled at long-term care facilities. When these
occur, both the Pharmacy Services and Retail/LTC segments record
the revenues, gross profit and operating profit on a standalone
basis.
|
|
(3) The
Corporate Segment includes $20 million and $156 million of
acquisition-related transaction and integration costs related to
the acquisition of Omnicare and the pharmacy and clinics of target
for the three months and year ended December 31, 2015,
respectively. For the three months and year ended December 31,
2015, the Corporate Segment also included a $90 million charge
related to a legacy lawsuit challenging the 1999 legal settlement
by MedPartners of various securities class actions and a related
derivative claim.
|
|
Supplemental
Information
|
|
(Unaudited)
|
|
|
Pharmacy Services
Segment
|
|
|
The following table
summarizes the Pharmacy Services Segment's performance for the
respective periods:
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
In millions
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net
revenues
|
|
$
|
26,514
|
|
|
$
|
23,874
|
|
|
$
|
100,363
|
|
|
$
|
88,440
|
|
|
Gross
profit
|
|
$
|
1,492
|
|
|
$
|
1,238
|
|
|
$
|
5,227
|
|
|
$
|
4,771
|
|
|
Gross profit % of net
revenues
|
|
5.6
|
%
|
|
5.2
|
%
|
|
5.2
|
%
|
|
5.4
|
%
|
|
Operating
expenses
|
|
$
|
340
|
|
|
$
|
329
|
|
|
$
|
1,238
|
|
|
$
|
1,257
|
|
|
Operating expense %
of net revenues
|
|
1.3
|
%
|
|
1.4
|
%
|
|
1.2
|
%
|
|
1.4
|
%
|
|
Operating
profit
|
|
$
|
1,152
|
|
|
$
|
909
|
|
|
$
|
3,989
|
|
|
$
|
3,514
|
|
|
Operating profit % of
net revenues
|
|
4.3
|
%
|
|
3.8
|
%
|
|
4.0
|
%
|
|
4.0
|
%
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
Mail
choice(1)
|
|
$
|
10,235
|
|
|
$
|
8,440
|
|
|
$
|
37,828
|
|
|
$
|
31,081
|
|
|
Pharmacy
network(2)
|
|
$
|
16,198
|
|
|
$
|
15,374
|
|
|
$
|
62,240
|
|
|
$
|
57,122
|
|
|
Other
|
|
$
|
81
|
|
|
$
|
60
|
|
|
$
|
295
|
|
|
$
|
237
|
|
|
Pharmacy claims
processed:
|
|
|
|
|
|
|
|
|
|
Total
|
|
259.6
|
|
|
242.9
|
|
|
1,011.9
|
|
|
932.0
|
|
|
Mail
choice(1)
|
|
22.2
|
|
|
21.3
|
|
|
85.7
|
|
|
82.4
|
|
|
Pharmacy
network(2)
|
|
237.4
|
|
|
221.6
|
|
|
926.2
|
|
|
849.6
|
|
|
Generic dispensing
rate:
|
|
|
|
|
|
|
|
|
|
Total
|
|
83.7
|
%
|
|
82.1
|
%
|
|
83.7
|
%
|
|
82.2
|
%
|
|
Mail
choice(1)
|
|
76.5
|
%
|
|
75.1
|
%
|
|
76.4
|
%
|
|
74.6
|
%
|
|
Pharmacy
network(2)
|
|
84.4
|
%
|
|
82.7
|
%
|
|
84.4
|
%
|
|
83.0
|
%
|
|
Mail choice
penetration rate
|
|
20.7
|
%
|
|
21.3
|
%
|
|
20.6
|
%
|
|
21.4
|
%
|
|
|
(1) Mail
choice is defined as claims filled at a Pharmacy Services mail
facility, which include specialty mail claims inclusive of
Specialty Connect® claims filled at retail, as well as
prescriptions filled at retail under the Maintenance Choice
program.
|
|
(2)
Pharmacy network net revenues, claims processed and generic
dispensing rates do not include Maintenance Choice®,
which are included within the mail choice category. Pharmacy
network is defined as claims filled at retail and specialty
pharmacies, including our retail drugstores and long-term care
pharmacies, but excluding Maintenance Choice activity.
|
|
Supplemental
Information
|
|
(Unaudited)
|
|
|
Retail/LTC
Segment
|
|
|
The following table
summarizes the Retail/LTC Segment's performance for the respective
periods:
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
In millions
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net
revenues
|
|
$
|
19,903
|
|
|
$
|
17,698
|
|
|
$
|
72,007
|
|
|
$
|
67,798
|
|
|
Gross
profit
|
|
$
|
6,002
|
|
|
$
|
5,558
|
|
|
$
|
21,992
|
|
|
$
|
21,277
|
|
|
Gross profit % of net
revenues
|
|
30.2
|
%
|
|
31.4
|
%
|
|
30.5
|
%
|
|
31.4
|
%
|
|
Operating
expenses(1)
|
|
$
|
3,923
|
|
|
$
|
3,778
|
|
|
$
|
14,862
|
|
|
$
|
14,515
|
|
|
Operating expense %
of net revenues
|
|
19.7
|
%
|
|
21.3
|
%
|
|
20.6
|
%
|
|
21.4
|
%
|
|
Operating
profit
|
|
$
|
2,079
|
|
|
$
|
1,780
|
|
|
$
|
7,130
|
|
|
$
|
6,762
|
|
|
Operating profit % of
net revenues
|
|
10.4
|
%
|
|
10.1
|
%
|
|
9.9
|
%
|
|
10.0
|
%
|
|
Prescriptions filled
(90 Day = 3 Rx) (2)
|
|
287.5
|
|
|
244.8
|
|
|
1,031.6
|
|
|
935.9
|
|
|
Net revenue increase
(decrease):
|
|
|
|
|
|
|
|
|
|
Total
|
|
12.5
|
%
|
|
2.9
|
%
|
|
6.2
|
%
|
|
3.3
|
%
|
|
Pharmacy
|
|
16.7
|
%
|
|
5.5
|
%
|
|
9.5
|
%
|
|
5.1
|
%
|
|
Front
store
|
|
1.2
|
%
|
|
(4.9)%
|
|
|
(2.5)%
|
|
|
(2.5)%
|
|
|
Total prescription
volume (90 Day = 3 Rx) (2)
|
|
7.1
|
%
|
|
6.7
|
%
|
|
10.2
|
%
|
|
5.2
|
%
|
|
Same store increase
(decrease)(3):
|
|
|
|
|
|
|
|
|
|
Total
sales
|
|
3.5
|
%
|
|
1.6
|
%
|
|
1.7
|
%
|
|
2.1
|
%
|
|
Pharmacy
sales
|
|
5.0
|
%
|
|
5.5
|
%
|
|
4.5
|
%
|
|
4.8
|
%
|
|
Front store
sales(4)
|
|
(0.5)
|
%
|
|
(7.2)
|
%
|
|
(5.0)
|
%
|
|
(4.0)%
|
|
|
Prescription volume
(90 Day = 3 Rx) (2)
|
|
5.0
|
%
|
|
5.3
|
%
|
|
4.8
|
%
|
|
4.1
|
%
|
|
Generic dispensing
rate
|
|
84.0
|
%
|
|
82.4
|
%
|
|
84.5
|
%
|
|
83.1
|
%
|
|
Pharmacy % of total
revenues
|
|
73.9
|
%
|
|
71.2
|
%
|
|
72.9
|
%
|
|
70.7
|
%
|
|
|
(1)
Operating expenses for the three months and year ended December 31,
2015 include $52 million and $64 million, respectively, of
acquisition-related integration costs related to the acquisition of
Omnicare and the pharmacies and clinics of Target.
|
|
(2)
Includes the adjustment to convert 90-day, non-specialty
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.
|
|
(3) Same
store sales and prescriptions exclude revenues from
MinuteClinic®, and revenue and prescriptions from stores
in Brazil, long-term care operations and from commercialization
services.
|
|
(4) Front
store same store sales would have been approximately 520 basis
points higher for the year ended December 31, 2015 if tobacco and
the estimated associated basket sales were excluded from the year
ended December 31, 2014.
|
|
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. All forward-looking information involves risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking information for a number of
reasons as described in our Securities and Exchange Commission
filings, including those set forth in the Risk Factors section and
under the section entitled "Cautionary Statement Concerning
Forward-Looking Statements" in our most recently filed Annual
Report on Form 10-K and Quarterly Report on Form 10-Q.
|
|
In millions, except per share amounts
|
|
Year
Ending
December 31, 2016
|
|
Income before income
tax provision(1)
|
|
$
|
9,394
|
|
|
$
|
9,670
|
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
Amortization of
intangible assets
|
|
800
|
|
|
798
|
|
|
Adjusted income
before income tax provision
|
|
10,194
|
|
|
10,468
|
|
|
Adjusted income tax
provision
|
|
3,974
|
|
|
4,078
|
|
|
Adjusted income from
continuing operations
|
|
6,220
|
|
|
6,390
|
|
|
Net income
attributable to noncontrolling interest
|
|
(7)
|
|
|
(7)
|
|
|
Income allocable to
participating securities
|
|
(30)
|
|
|
(30)
|
|
|
Adjusted income from
continuing operations attributable to CVS Health
|
|
$
|
6,183
|
|
|
$
|
6,353
|
|
|
Weighted average
diluted shares outstanding
|
|
1,080
|
|
|
1,080
|
|
|
Adjusted earnings per
share
|
|
$
|
5.73
|
|
|
$
|
5.88
|
|
|
|
In millions, except per share amounts
|
|
Three Months
Ending
March 31, 2016
|
|
Income before income
tax provision(1)
|
|
$
|
1,883
|
|
|
$
|
1,939
|
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
Amortization of
intangible assets
|
|
202
|
|
|
202
|
|
|
Adjusted income
before income tax provision
|
|
2,085
|
|
|
2,141
|
|
|
Adjusted income tax
provision
|
|
824
|
|
|
846
|
|
|
Adjusted income from
continuing operations
|
|
1,261
|
|
|
1,295
|
|
|
Net income
attributable to noncontrolling interest
|
|
(2)
|
|
|
(2)
|
|
|
Income allocable to
participating securities
|
|
(6)
|
|
|
(6)
|
|
|
Adjusted income from
continuing operations attributable to CVS Health
|
|
1,253
|
|
|
1,287
|
|
|
Weighted average
diluted shares outstanding
|
|
1,098
|
|
|
1,098
|
|
|
Adjusted earnings per
share
|
|
$
|
1.14
|
|
|
$
|
1.17
|
|
|
|
(1)
Excludes acquisition-related integration costs for the acquisitions
of Omnicare and the pharmacies and clinics of Target.
|
|
Free Cash Flow
Guidance
|
|
(Unaudited)
|
|
|
The following
reconciliation of net cash provided by operating activities to free
cash flow contains forward-looking information. All forward-looking
information involves risks and uncertainties. Actual results may
differ materially from those contemplated by the forward-looking
information for a number of reasons as described in our Securities
and Exchange Commission filings, including those set forth in the
Risk Factors section and under the section entitled "Cautionary
Statement Concerning Forward-Looking Statements" in our most
recently filed Annual Report on Form 10-K and 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.
|
|
|
In millions
|
|
Year
Ending
December 31, 2016
|
|
Net cash provided by
operating activities
|
|
$
|
7,575
|
|
|
$
|
7,875
|
|
|
Subtract: Additions
to property and equipment
|
|
(2,550)
|
|
|
(2,450)
|
|
|
Add: Proceeds from
sale-leaseback transactions
|
|
275
|
|
|
175
|
|
|
Free cash
flow
|
|
$
|
5,300
|
|
|
$
|
5,600
|
|
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SOURCE CVS Health