10-QPeriod: Q1 FY2009

CVS HEALTH Corp Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 5, 2009For Securities:CVS

Summary

CVS Health Corporation (CVS) reported its first quarter 2009 financial results, highlighting a 9.8% increase in net revenues to $23.4 billion, driven significantly by the acquisition of Longs Drug Stores. Despite revenue growth, net earnings saw a slight decrease of 1.3% to $738.4 million compared to the prior year period. This decline is attributed to a loss from discontinued operations related to lease obligations and increased operating expenses, partly due to integration costs from the Longs acquisition. The company's performance demonstrates continued top-line growth, supported by strategic acquisitions and an expanding retail footprint, while navigating the complexities of integrating new businesses and managing ongoing operational costs.

Financial Highlights

29 data points
Beta

Revenue

$23.39B

20.3% Gross Margin

Net Income

$739.00M

3.2% Net Margin

EPS (Diluted)

$0.50

Cash & Equivalents

$997.00M

Free Cash Flow

$305.00M

Financial Statements
Beta
Revenue$23.39B
Cost of Revenue$18.65B
Gross Profit$4.75B
Operating Expenses$3.37B
Operating Income$1.38B
Net Income$739.00M
EPS (Basic)$0.51
EPS (Diluted)$0.50
Shares Outstanding (Basic)1.45B
Shares Outstanding (Diluted)1.47B

Key Highlights

  • 1Net revenues increased by 9.8% to $23.4 billion, largely due to the acquisition of Longs Drug Stores, which contributed approximately $1.4 billion.
  • 2Net earnings decreased by 1.3% to $738.4 million, or $0.50 per diluted share, from $748.5 million, or $0.51 per diluted share, in the prior year quarter.
  • 3The Pharmacy Services segment reported a 7.2% increase in net revenues to $11.5 billion, with a notable rise in generic dispensing rates.
  • 4The Retail Pharmacy segment saw its net revenues grow by 13.9% to $13.5 billion, with same-store sales increasing by 3.3% overall.
  • 5Operating expenses rose by 15.3% due to the Longs acquisition and related integration costs.
  • 6The company issued $1.0 billion in unsecured senior notes to repay borrowings and for general corporate purposes, demonstrating active debt management.
  • 7A loss of $5.1 million from discontinued operations was recorded, primarily related to lease guarantee obligations for divested subsidiaries like Linens 'n Things.

Frequently Asked Questions

The primary driver of the revenue increase was the acquisition of Longs Drug Stores Corporation in October 2008. This acquisition contributed approximately $1.4 billion to the net revenues in the first quarter of 2009.

The decrease in net earnings was primarily due to a loss from discontinued operations related to lease guarantees for divested businesses, which amounted to $5.1 million. Additionally, operating expenses increased by 15.3%, partly due to integration costs associated with the Longs acquisition.

The Longs acquisition significantly boosted the Retail Pharmacy segment's net revenues, contributing approximately $1.2 billion. While not explicitly broken down for the Pharmacy Services segment, the overall increase in consolidated revenues reflects the impact of this acquisition across the company.

CVS Health anticipates that cash flows from operations, supplemented by short-term and long-term borrowings, will fund future growth. The company actively managed its debt by issuing $1.0 billion in senior notes and maintained access to credit facilities.