CVS Health Reports Record Second Quarter Results
CVS Health Corporation has announced operating results for the 3 months ended June 30, 2015.
Aug. 4, 2015
CVS Health Corporation (NYSE: CVS
) today announced operating results for the three months ended June 30, 2015.
Net revenues for the three months ended June 30, 2015, increased 7.4%, or
compared to the three months ended June 30, 2014.
Revenues in the Pharmacy Services Segment increased 11.9%, or
in the three months ended June 30, 2015. The increase was primarily driven by growth in specialty pharmacy and pharmacy network claims. Pharmacy network claims processed during the three months ended June 30, 2015, increased 8.7% to approximately 229 million compared to 210 million in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business as well as growth in Managed Medicaid. Mail choice claims processed during the three months ended June 30, 2015, increased 3.9% to 21.3 million, compared to 20.5 million in the prior year. The increase in mail choice claims was driven by specialty claim volume and increased claims associated with the continued adoption of our Maintenance Choice
Revenues in the Retail Pharmacy Segment increased 2.2%, or
in the three months ended June 30, 2015. Same store sales increased 0.5% versus the second quarter of last year, with pharmacy same store sales up 4.1% and front store same store sales down 7.8%. On a comparable basis, front store same store sales would have been approximately 780 basis points higher if tobacco and the estimated associated basket sales were excluded from the three months ended
June 30, 2014
. Front store same store sales were impacted by softer customer traffic, partially offset by an increase in basket size. Pharmacy same store prescription volumes rose 4.8% on a 30-day equivalent basis. Pharmacy same store sales were negatively impacted by approximately 370 basis points from recent generic drug introductions and by approximately 80 basis points from the implementation of Specialty Connect
. The implementation of Specialty Connect had a greater effect on revenues than prescription volumes due to the higher dollar value of specialty products.
For the three months ended June 30, 2015, the generic dispensing rate increased approximately 150 basis points from the prior year in both segments, rising to 83.9% in the Pharmacy Services Segment and 85.0% in the Retail Pharmacy Segment.
Operating Profit and Net Income
Operating profit for the Pharmacy Services Segment increased 7.1% and for the Retail Pharmacy Segment declined 1.4% for the three months ended
June 30, 2015
. Both segments benefited from the impact of increased generic drugs dispensed and favorable purchasing economics. The Pharmacy Services Segment was also positively impacted by growth in specialty pharmacy and pharmacy network volume, partially offset by price compression. The Retail Pharmacy Segment was negatively impacted by continued reimbursement pressure, partially offset by increased sales and an improved front store margin rate, largely driven by the removal of tobacco products and changes in product mix. The Corporate Segment includes
of acquisition-related transaction costs for the three months ended
June 30, 2015
related to the proposed acquisitions of Omnicare, Inc. ("Omnicare") and the pharmacies and clinics of Target Corporation ("Target"). The acquisition of Omnicare is expected to close prior to the end of 2015, potentially as early as the third quarter. The close of the acquisition of the pharmacies and clinics of Target is uncertain and could occur in either 2015 or 2016.
Net income for the three months ended June 30, 2015, increased 2.1%, or
, compared with approximately
during the three months ended
June 30, 2014
. In addition to the
of transaction costs discussed above, net income for the three months ended
June 30, 2015
of pre-tax acquisition-related financing costs related to the proposed Omnicare and Target acquisitions (combined impact of approximately
per diluted share). Excluding the acquisition-related transaction and financing costs, net income increased 4.9%
. Adjusted earnings per share (Adjusted EPS) for the three months ended June 30, 2015 and 2014, was
, respectively. Excluding the acquisition-related transaction and financing costs, Adjusted EPS increased 7.7% to
. Adjusted EPS in the three months ended
in 2015 and 2014, respectively, of intangible asset amortization related to acquisition activity. GAAP earnings per share for the three months ended June 30, 2015 and 2014, was
, respectively, an increase of 5.3%, which includes the acquisition-related transaction and financing costs.
President and Chief Executive Officer
stated, "I'm very pleased to report second quarter results that exceeded our expectations. On an underlying basis, we surpassed the high end of our guidance range by
, as operating profit in the retail business exceeded our expectations while operating profit in the PBM was in line with our guidance. We have also generated more than
in free cash flow in the first half of 2015, putting us well on our way to return more than
to shareholders through dividends and share repurchases this year."
Mr. Merlo continued, "Additionally, I'm pleased to report that we're having a highly successful 2016 PBM selling season and have won significant net new business. Our unmatched suite of assets is enabling us to bring innovative, channel-agnostic products and services to the marketplace. In this era of consumer-directed health care, our assets have uniquely positioned us to provide patients with greater choice as to how they receive their pharmacy care while driving positive impacts on adherence through face-to-face interactions. This should result in lower overall health care costs providing savings for clients as well as better health outcomes and convenience for patients."
Given the strong performance this quarter, along with the previously-announced acquisition-related decision to reduce this year's share repurchases by
, the Company narrowed guidance for the full year 2015 and now expects to deliver Adjusted EPS of
$5.11 to $5.18
$5.08 to $5.19
and GAAP diluted EPS of
$4.64 to $4.71
$4.80 to $4.91
. This Adjusted EPS guidance excludes the impact of acquisition-related transaction and financing costs that have been recorded (
of transaction costs and
of financing costs for the three and six months ended
June 30, 2015
, or approximately
per share), and any additional costs that would be recorded if the proposed acquisitions of Omnicare and the pharmacies and clinics of Target close prior to the end of 2015. The Company continues to expect to deliver 2015 free cash flow of
$5.9 billion to $6.2 billion
, and 2015 cash flow from operations of
$7.6 billion to $7.9 billion
. For the third quarter of 2015, the Company expects to deliver Adjusted EPS of
$1.27 to $1.30
, excluding any acquisition-related transaction and financing costs, and GAAP diluted EPS of
$1.13 to $1.16
Real Estate Program
During the three months ended June 30, 2015, the Company opened 25 new retail drugstores and closed 5 retail drugstores and one branch for infusion and enteral services. In addition, the Company relocated 16 retail drugstores. As of June 30, 2015, the Company operated 8,028 locations in 47 states, the
District of Columbia
. These locations included 7,870 retail drugstores, 18 onsite pharmacies, 24 retail specialty pharmacy stores, 11 specialty mail order pharmacies, four mail service dispensing pharmacies, and 85 branches for infusion and enteral services, including approximately 72 ambulatory infusion suites and six centers of excellence.
Teleconference and Webcast
The Company will be holding a conference call today for the investment community at
8:30 am (EDT)
to discuss its quarterly results. An audio webcast of the 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 the Company
CVS Health is a pharmacy innovation company helping people on their path to better health. Through its more than 7,800 retail drugstores, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the Company enables people, businesses and communities to manage health in more affordable, 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