Caremark Rx, Inc. Announces Record Third Quarter 2002 Results; Diluted Earnings Per Share $.31; Guidance for 2002 Increased; Record $1.2 Billion in Net New Business for 2003.Business Editors BIRMINGHAM Birmingham, cities, United States Birmingham (bûr`mĭnghăm') 1 City (1990 pop. 265,968), seat of Jefferson co., N central Ala., in the Jones Valley near the southern end of the Appalachian system; founded and inc. , Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. .--(BUSINESS WIRE)--Oct. 24, 2002 Caremark Rx  The introduction to this article may be too long. Please help improve the introduction by moving some material from it into the body of the article according to the suggestions at , Inc. (NYSE NYSESee: New York Stock Exchange : CMX CMX Corel Presentation Exchange (file extension) CMX Cisco Mobile Exchange CMX Cloaca Maxima (sewage system of ancient Rome; Finnish rock band) CMX Crisis Management Exercise ), one of the nation's leading pharmaceutical services companies, today reported record earnings for the third quarter ended September September: see month. 30, 2002, with a 63% increase in diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of compared to the prior year. Increased revenues, a strong mail-order mail order n. An order for goods to be shipped through the mail.  -or mix, and increased usage of generic drugs generic drug, a drug sold or prescribed under the nonproprietary name of its active ingredients or under a generally descriptive name rather than under a brand or trade name. were the major reasons for the growth in earnings.
Operating Results - Third Quarter of 2002 Caremark reported net revenues of $1.7 billion for the third quarter of 2002, a 24% increase over the same period of the prior year. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. earnings per common share increased 63% to $.31 from $.19 in the same quarter last year, exceeding First Call consensus estimates by $.03 per share. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the before interest, taxes, depreciation, and amortization) increased by 46% to $108.1 million from $74.0 million, and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (income from continuing operations before interest and income taxes) increased 49% to $100.3 million from $67.4 million for the comparable quarter in 2001. EBITDA margin was 6.3% compared to 5.4% in last year's period. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the third quarter of 2002 totaled $121.0 million, a 51% increase over the $80.1 million reported during the same period of 2001. At September 30, 2002 the company's cash balance had increased to $249.9 million, and net debt was $448.8 million, a reduction of $80.0 million since June June: see month. 30, 2002. As of October October: see month. 15, the company had converted 100% of its $200 million of convertible preferred securities to common stock. Caremark initiated its stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program and spent approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $9.2 million during the third quarter. To date, the company has acquired 694,100 shares of its common stock and spent $9.6 million in total consideration through its buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may program. During the third quarter of 2002, mail pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. prescriptions increased to 5.1 million, an 11% increase over the same period last year. Mail order prescriptions represented 22% of all prescriptions processed during the third quarter, or 46% of all prescriptions processed on a retail-adjusted basis. Retail claims totaled 17.6 million during the third quarter, representing a 15% increase over the third quarter of 2001. "We are quite pleased with our performance during the third quarter of 2002," said Mac Crawford, Chairman of the Board and Chief Executive Officer of Caremark Rx, Inc. "As we expected, our revenue growth accelerated during the quarter largely due to the addition of new contracts which started in July July: see month. as well as continued strong demand for our specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. mail products. Our margin improvement can be attributed to a stronger than anticipated mail mix and generic Generic Describes the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue. utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be that was higher than our expectations." Crawford continued, "Based on the results of the third quarter, we now expect 2002 earnings per share to be $1.15, compared to our previous expectation of $1.06 to $1.08." Nine Month Results For the year to date nine month period, Caremark Rx generated net revenues of $5.0 billion, a 20% increase over the same period of 2001. Diluted earnings per common share increased by 64% to $.82 from $.50 in the same period of 2001. Year to date EBITDA increased by 38% to $291.8 million from $211.6 million in the prior year. Operating income increased by 41% to $270.0 million from $191.8 million in the comparable period last year. In addition, the company's EBITDA margin for the nine month period was 5.9% compared to 5.1% during the prior year. Operating cash flow for the nine months ended September 30, 2002 was $308.0 million as compared to $213.8 million during the same period of 2001, an increase of 44%. During the first nine months of 2002, mail pharmacy prescriptions totaled 14.8 million, an increase of 10% over the same period of the prior year. For the nine months, mail order prescriptions represented 22% of all prescriptions processed or 45% on a retail-adjusted basis. Retail claims for the period totaled 52.6 million, an increase of 11% over prior year totals. New Business Contracts for 2003 As management has previously indicated, net new business wins for 2003 (new contract wins less contract terminations Defense procurement: the cessation or cancellation, in whole or in part, of work under a prime contract or a subcontract thereunder for the convenience of, or at the option of, the government, or due to failure of the contractor to perform in accordance with the terms of the contract (default). ) will set an all time record for the company. At the current time, net new business for 2003 stands at approximately $1.2 billion. Crawford continued, "The demand for our services continues to be strong as evidenced by both the renewal rate of our existing accounts as well as the significant levels of new business wins for 2003. The continued growth of our business is indicative indicative: see mood. of the strength of our business model and the value that customers realize from the utilization of our products and services." Conference Call As announced, Caremark will hold a conference call to discuss third quarter earnings. The details of the call are as follows: Date: Thursday, October 24, 2002 Time: 10:30 A.M. Eastern Time Telephone Number: (312) 461-9314 Passcode: 5307812 Leader: Mac Crawford Replay Number: (719) 457-0820 Passcode: 404407 The call will also be broadcast live as well as replayed through the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . The webcast can be accessed through the "Investor Information" page on the Caremark Rx, Inc. website at www.caremarkrx.com. A taped replay of the call will be available until midnight Eastern Time, November November: see month. 7, 2002 by calling the replay number listed above or by accessing the webcast replay at the "Investor Information" page on the Caremark Rx, Inc. website at www.caremarkrx.com. About Caremark Rx, Inc. Caremark is a leading pharmaceutical services company, providing comprehensive drug benefit services to over 1,200 health plan sponsors and holding contracts to serve approximately 24 million participants throughout the U.S. Caremark's clients include corporate health plans, managed care organizations, insurance companies, unions, government agencies, and other funded benefit plans. The company operates a national retail pharmacy network with over 55,000 participating pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major , three state-of-the-art mail service pharmacies, the industry's only FDA-regulated repackaging plant and 21 specialty distribution mail service pharmacies for delivery of advanced medications to individuals with chronic or genetic diseases and disorders A
Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains statements that constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. "Forward-looking statements" contained in this press release include the intent, belief or current expectations of the company and members of its senior management team with respect to the anticipated growth prospects for the company's business, including the earnings per share projections for the company in 2002, expected revenues and the outlook for 2003 net new business, as well as the assumptions upon which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this press release include, but are not limited to, adverse developments with respect to the company's operating plan and objectives, as well as adverse developments in the healthcare or pharmaceutical industry generally. Additional factors that could cause actual results to differ materially from those contemplated in this press release can be found in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2001. Additional information about Caremark Rx is available on the World Wide Web at http:\\www.caremarkrx.com.
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September December
30, 31,
2002 2001
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 249,943 $ 159,066
Accounts receivable, net 490,784 324,086
Inventories 165,307 146,362
Prepaid expenses and other current assets 6,701 10,375
Current assets of discontinued operations 2,737 7,565
----------- -----------
Total current assets 915,472 647,454
Property and equipment, net 128,993 119,511
Intangible assets, net 69,564 26,018
Other assets 74,594 77,714
Non-current assets of discontinued operations 2,728 2,974
----------- -----------
Total assets $ 1,191,351 $ 873,671
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 548,652 $ 444,301
Other accrued expenses and liabilities 227,255 204,534
Income taxes payable 3,451 3,033
Current portion of long-term debt 2,500 2,500
Current liabilities of discontinued
operations 19,065 24,489
----------- -----------
Total current liabilities 800,923 678,857
Long-term debt, net of current portion 696,250 695,625
Other long-term liabilities 50,931 70,916
Long-term liabilities of discontinued
operations - 740
----------- -----------
Total liabilities 1,548,104 1,446,138
Commitments and contingencies
Convertible Preferred Securities 200,000 200,000
Stockholders' deficit:
Common stock 235 233
Additional paid-in capital 1,401,989 1,395,246
Treasury stock (9,239) -
Shares held in trust (103,360) (104,581)
Accumulated deficit (1,846,378) (2,063,365)
----------- -----------
Total stockholders' deficit (556,753) (772,467)
----------- -----------
Total liabilities and stockholders'
deficit $ 1,191,351 $ 873,671
=========== ===========
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenue $ 1,713,392 $ 1,380,458 $ 4,953,975 $ 4,127,788
Operating expenses:
Cost of revenues 1,564,214 1,271,387 4,543,125 3,810,174
Selling, general
and
administrative
expenses 41,087 35,032 119,004 106,058
Depreciation and
amortization 7,819 6,640 21,822 19,785
------------ ------------ ------------ ------------
Operating income 100,272 67,399 270,024 191,771
Interest expense,
net 11,627 14,330 35,443 51,233
------------ ------------ ------------ ------------
Income before
provision for
income taxes 88,645 53,069 234,581 140,538
Provision for
income taxes 6,649 3,980 17,594 10,540
------------ ------------ ------------ ------------
Net income 81,996 49,089 216,987 129,998
Preferred security
dividends 3,304 3,304 9,913 9,913
------------ ------------ ------------ ------------
Net income to
common
stockholders $ 78,692 $ 45,785 $ 207,074 $ 120,085
============ ============ ============ ============
Average number of
common shares
outstanding -
basic 228,529 225,411 227,829 224,302
Dilutive effect of
stock options 8,497 10,886 9,897 10,915
Presumed
conversion of
Convertible
Preferred
Securities 26,850 26,850 26,850 26,850
------------ ------------ ------------ ------------
Average number of
common shares
outstanding -
diluted 263,876 263,147 264,576 262,067
============ ============ ============ ============
Net income per
common share -
basic $ 0.34 $ 0.20 $ 0.91 $ 0.54
============ ============ ============ ============
Net income per
common share -
diluted $ 0.31 $ 0.19 $ 0.82 $ 0.50
============ ============ ============ ============
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
---------------------
2002 2001
--------- ---------
Cash flows from continuing operations:
Net income $ 216,987 $ 129,998
Adjustments to reconcile net income to net cash
provided by continuing operations:
Depreciation and amortization 21,822 19,785
Non-cash interest expense 2,498 2,817
Other 724 -
Changes in operating assets and liabilities,
net of effects of acquisitions of businesses 65,935 61,235
--------- ----------
Net cash provided by continuing operations 307,966 213,835
Cash flows from investing activities:
Capital expenditures, net (30,951) (26,821)
Acquisitions of business, net of cash acquired (49,581) -
--------- ----------
Net cash used in investing activities (80,532) (26,821)
Cash flows from financing activities:
Proceeds from issuance of equity securities, net 17,155 13,478
Purchase of treasury stock (9,239) -
Net proceeds (repayments)
under credit facility 625 (36,472)
Long-term debt issuance costs (1,270) (5,110)
Net proceeds (repayments) under
trade receivables sales facility (99,200) 14,499
Dividend payments on
Convertible Preferred Securities (10,500) (6,892)
---------- ----------
Net cash used in financing activities (102,429) (20,497)
Cash used in discontinued operations (34,128) (38,678)
Cash paid for special charges - (884)
---------- ----------
Net increase in cash and cash equivalents 90,877 126,955
Cash and cash equivalents
- beginning of period 159,066 2,352
---------- ----------
Cash and cash equivalents - end of period $ 249,943 $ 129,307
========== ==========
Caremark Rx, Inc.
Selected Statistics & Ratios
(Millions) Quarter Ended Quarter Ended Percentage
09/30/2002 09/30/2001 Increase
-------------- ------------- ----------
Claims Processed
Mail 5.1 4.6 11%
Retail 17.6 15.3 15%
------ ------ ------
Total 22.7 19.9 14%
Adjusted Claims 32.6 28.8 13%
Per Adjusted Claim
Gross Profit/Adjusted Claim $ 4.58 $ 3.78 21%
EBITDA/Adjusted Claim $ 3.32 $ 2.57 29%
YTD YTD Percentage
09/30/2002 09/30/2001 Increase
-------------- -------------- ----------
Claims Processed
Mail 14.8 13.5 10%
Retail 52.6 47.3 11%
------ ------ -----
Total 67.4 60.8 11%
Adjusted Claims 96.3 87.1 10%
Per Adjusted Claim
Gross Profit/Adjusted Claim $ 4.27 $ 3.64 17%
EBITDA/Adjusted Claim $ 3.03 $ 2.43 25%
09/30/2002 09/30/2001
-------------- --------------
Balance Sheet Debt
Revolver $ - $ -
Term Loans 248.8 248.8
Senior Notes 450.0 450.0
------ ------
Total Debt $698.8 $698.8
Cash $249.9 $129.3
Net Debt $448.8 $569.5
LTM EBITDA $377.3 $276.5
Net Debt to LTM EBITDA 1.2x 2.1x
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