10-QPeriod: Q1 FY2014

CVS HEALTH Corp Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 2, 2014For Securities:CVS

Summary

CVS Health Corporation (CVS) reported strong financial results for the first quarter ended March 31, 2014. Net revenues increased by 6.3% year-over-year, driven by growth in both the Pharmacy Services and Retail Pharmacy segments. The Pharmacy Services segment saw particular strength from its specialty pharmacy business, including the recent acquisition of Coram LLC, and also benefited from increased generic dispensing rates. The Retail Pharmacy segment experienced growth in pharmacy same-store sales and revenue from new stores, despite a slight decrease in front-store sales, which was attributed to factors like weather and the timing of the Easter holiday. Profitability also showed improvement, with operating profit increasing by 19.7%. Net income rose to $1.129 billion from $954 million in the prior year's quarter, leading to a diluted EPS of $0.95, up from $0.77. The company also actively managed its capital, repurchasing approximately $0.8 billion of its common stock during the quarter. Key strategic initiatives, such as the pending generic sourcing venture with Cardinal Health, were also highlighted, positioning CVS Health for continued market presence and operational efficiency.

Financial Highlights

53 data points
Beta

Revenue

$32.69B

18.2% Gross Margin

Net Income

$1.13B

3.5% Net Margin

EPS (Diluted)

$0.95

Total Assets

$72.82B

Cash & Equivalents

$2.77B

Free Cash Flow

$1.78B

Financial Statements
Beta
Revenue$32.69B
Cost of Revenue$26.75B
Gross Profit$5.94B
Operating Expenses$3.92B
Operating Income$2.02B
Interest Expense$161.00M
Net Income$1.13B
EPS (Basic)$0.96
EPS (Diluted)$0.95
Shares Outstanding (Basic)1.18B
Shares Outstanding (Diluted)1.19B

Key Highlights

  • 1Net revenues increased by 6.3% to $32.7 billion in Q1 2014 compared to Q1 2013.
  • 2Operating profit grew by 19.7% to $2.0 billion, indicating improved operational efficiency.
  • 3Net income rose by 18.3% to $1.13 billion, demonstrating strong bottom-line performance.
  • 4Diluted earnings per share (EPS) increased to $0.95 from $0.77 in the prior year's quarter.
  • 5The company completed the acquisition of Coram LLC for approximately $2.1 billion in January 2014, expanding its specialty infusion services.
  • 6CVS Health repurchased approximately $0.8 billion of its common stock during the quarter under its share repurchase programs.
  • 7The generic dispensing rate across both segments continued to increase, improving margins and cost-effectiveness.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in net revenues across both the Pharmacy Services segment and the Retail Pharmacy segment. The Pharmacy Services segment benefited from growth in its specialty pharmacy business, including the recent Coram acquisition, and an increase in generic dispensing rates. The Retail Pharmacy segment saw growth from pharmacy same-store sales and new store openings.

The acquisition of Coram LLC, completed in January 2014 for approximately $2.1 billion, contributed to the growth in the Pharmacy Services segment's net revenues. The integration of Coram's specialty infusion services is expected to enhance CVS Health's position in the specialty pharmaceuticals market.

CVS Health continued its share repurchase program during the quarter, buying back approximately $0.8 billion of its common stock. As of March 31, 2014, approximately $5.9 billion remained available under its authorized repurchase programs, indicating a continued commitment to returning capital to shareholders.

The filing mentions several ongoing legal matters and investigations, including a settlement with the SEC for $20 million related to disclosures in 2009 and the purchase accounting for the Longs Drug Stores acquisition. While these are noted, the company states that it records accruals when probable and estimable, and none of the individual or aggregate accruals for legal matters are considered material to its financial position at this time. The company is cooperating with ongoing investigations.