Caremark Rx, Inc. Reports First Quarter 2006 Diluted EPS of $0.51; Company Raises Full Year 2006 Earnings Guidance.NASHVILLE Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. , Tenn. -- 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 ) today reported first quarter 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 of $0.51, exceeding the top of the company's guidance range by $0.01 per share. Diluted earnings per share grew 19% compared to the first quarter of 2005. First Quarter Operating Results Net revenues were $8.9 billion in the first quarter of 2006, an increase of 7% over the first quarter of 2005. 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. revenues increased 11% to $3.1 billion and mail claims were 15.1 million, up 5% from the first quarter of 2005. Retail revenues grew 4% to $5.7 billion compared to the first quarter of 2005. Retail prescription prescription In property law, the effect of the lapse of time in creating and destroying rights. Acquisitive prescription allows an individual, after unequivocal possession for a specific period, to acquire an interest in real property, such as an easement, but not the volume decreased 10% to 117.2 million claims compared to the first quarter of 2005. The decrease in retail claims is primarily a result of previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). terminations of retail-oriented contracts, partially offset by an increase in Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. claims. Gross margin as a percent of sales was 6%, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 25 basis points higher than last year. Selling, general and administrative expenses were $129.6 million, an increase of 13% over the first quarter of 2005. The majority of the increase is related to increased share-based compensation expense resulting from the adoption of FAS 123R and costs associated with the Medicare Part D program. 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 before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
"Our first quarter financial performance represents a good start to the year with growth in both mail service and retail revenues. Caremark has emerged as a significant participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. in the Medicare Part D program. Combined enrollment in SilverScript, our national PDP (1) (Plasma Display Panel) See plasma display. (2) (Policy Decision Point) See COPS and XACML. (3) (Programmed Data P , and through our health plan clients places us among the ten largest Prescription Drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, Plans. We have made a significant investment in the Medicare Prescription Drug Program and as a result we have one of the broadest offerings in the business," said Mac Crawford, Chairman, President and Chief Executive Officer. "During the quarter, we also took steps to increase shareholder returns by initiating a quarterly dividend, continuing to use cash to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. shares and actively evaluating strategic acquisitions that complement our current capabilities." Balance Sheet and Cash Flow At March 31, 2006, net cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments totaled $1.5 billion, reflecting total cash and cash equivalents and short-term investments of nearly $2.0 billion, offset by Senior Notes totaling $450.0 million. 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. in the first quarter was $364.4 million compared to $267.0 million in the first quarter of 2005. Capital expenditures totaled $28.8 million in the first quarter of 2006. Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. and Dividend In November November: see month. 2005, Caremark's Board of Directors approved an additional $500 million in share repurchases bringing the total authorization The right or permission to use a system resource; the process of granting access. See access control. to $1.75 billion. From August 2002 through the end of 2005, Caremark repurchased 29.3 million shares at a total cost of $986.6 million. During the first quarter of 2006, the company repurchased 8.0 million shares at an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. total cost of $401.2 million. Since March 31, 2006, Caremark repurchased 5.3 million shares at an approximate total cost of $241.3 million. To date, share repurchases total 42.6 million shares at an approximate total cost of $1.629 billion, leaving $121 million available under the authorization as of May 2, 2006. On April 5, 2006, Caremark announced that its Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly cash dividend of $0.10 per share of common stock. The first quarterly dividend will be payable on July July: see month. 17, 2006 to stockholders of record on June June: see month. 30, 2006. Medicare Part D Caremark operates SilverScript Insurance Company, a national Prescription Drug Plan approved by the Centers for Medicare and Medicaid Services The Centers for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is a federal agency within the United States Department of Health and Human Services (DHHS) that administers the Medicare program and (CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. ). SilverScript provides access to medications for dual-eligible beneficiaries in 27 regions of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . As of May 1, 2006, more than 400,000 eligible participants were enrolled with SilverScript to receive Medicare drug benefit coverage. Caremark is also providing pharmacy benefit management A Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug programs. They are primarily responsible for processing and paying prescription drug claims. services to Medicare beneficiaries in support of its health plan clients, and Caremark is assisting employer clients who qualify for the Medicare Part D subsidy subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. or who plan to offer other benefits to their Medicare Part D eligible participants. Financial Guidance There are a number of factors that may affect projected 2006 results, including the timing of 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. launches, the number of initial suppliers of each new generic drug 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. , and certain aspects of the Medicare Part D benefit. As a result of share repurchases and the first quarter results, the company is raising its full year earnings per share guidance range. Diluted earnings per share for 2006 are now expected to be in the range of $2.29 to $2.35 including the impact of share-based compensation expense, a requirement under FAS 123R effective January January: see month. 1, 2006. There are several key assumptions supporting the full year 2006 earnings guidance range. --Revenue in 2006 is projected to grow in the range of 5% to 10%. --FAS 123R share-based compensation expense is expected to be $40 million to $45 million before taxes. --Depreciation expense is expected to be $105 million to $110 million. --Amortization expense is estimated to be $43 million to $44 million. --Net interest income is estimated to be $45 million to $50 million, but is subject to change based on interest rates and the timing and magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the of cash flows. --The effective tax rate is expected to be 39.5%. --Assuming full dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. , weighted average shares outstanding for 2006 should be in the range of 444 million to 447 million. Second quarter diluted earnings per share should be in the range of $0.54 to $0.55, including FAS 123R share-based compensation expense. Webcast of Earnings Conference Call As previously announced, Caremark will hold a conference call to discuss first quarter 2006 results, its 2006 outlook and the general operations of the company. Investors and the general public can access a live webcast of the conference call through the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " page at www.caremarkrx.com. The call will be held Tuesday Tuesday: see week. , May 2, 2006 at 10:30 a.m. Eastern Time (9:30 a.m. Central Time) and will be available for replay via the website through May 16, 2006. About Caremark Rx, Inc. Caremark Rx, Inc. is a leading pharmaceutical services company, providing through its affiliates comprehensive drug benefit services to over 2,000 health plan sponsors and their plan participants Plan participants Employees or other beneficiaries who are eligible to receive benefits from a company's employee benefit plan. throughout the U.S. The company's clients include corporate health plans, managed care organizations, insurance companies, unions, government agencies and other funded benefit plans. In addition, Caremark is a national provider of drug benefits to eligible beneficiaries under the Medicare Part D program. The company operates a national retail pharmacy network with over 60,000 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 , seven mail service pharmacies, the industry's only FDA-regulated repackaging plant and 21 licensed 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. pharmacies for delivery of advanced medications to individuals with chronic or genetic diseases and disorders A
Additional information about Caremark is available at www.caremarkrx.com 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 "forward-looking statements," as defined in 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, and such statements are based on management's current expectations with respect to anticipated growth and performance prospects. Forward-looking statements in this press release include 2006 earnings per share projections, 2006 revenue growth, the anticipated impact in 2006 of the company's participation in the Medicare Part D program and projected enrollment of Medicare Part D beneficiaries, estimated 2006 assumptions set forth in the "Financial Guidance" section of this press release and other assumptions. Current and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, involve risks and uncertainties and that actual results may differ materially due to various factors. For example, adverse developments could occur with respect to the company's operating plan and objectives, competitive trends, Medicare Part D participation, the timing and launch of new branded and generic pharmaceuticals, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and legal matters, government investigations and governmental action regarding pricing and reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. . Additional factors can be found in the company's Forms 10-K, 10-Q and other SEC filings. This press release includes certain non-GAAP financial measures as defined under SEC rules. A reconciliation to the most directly comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures can be found in the footnotes to the tables attached to this press release.
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $1,198,653 $1,268,883
Short-term investments 739,960 666,040
Short-term investments - restricted 27,500 27,500
Accounts receivable, net 2,198,618 2,074,586
Inventories 419,918 449,199
Deferred tax asset, net 102,979 112,586
Prepaid expenses and other current assets 69,722 46,303
------------ ------------
Total current assets 4,757,350 4,645,097
Property and equipment, net 318,472 314,959
Goodwill, net 7,131,050 7,131,050
Other intangible assets, net 719,187 731,300
Other assets 28,727 28,442
------------ ------------
Total assets $12,954,786 $12,850,848
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $927,532 $849,358
Claims and discounts payable 2,370,706 2,438,813
Other accrued expenses and liabilities 456,742 343,158
Income taxes payable 81,454 17,137
Current portion of long-term debt 61,600 63,400
------------ ------------
Total current liabilities 3,898,034 3,711,866
Long-term debt, net of current portion 388,400 386,600
Deferred tax liability 236,635 245,389
Other long-term liabilities 330,979 326,427
------------ ------------
Total liabilities 4,854,048 4,670,282
Commitments and contingencies
Stockholders' equity:
Common stock 484 481
Additional paid-in capital 8,802,693 8,719,492
Treasury stock (1,387,802) (986,641)
Shares held in trust (92,733) (93,616)
Retained earnings 780,244 551,447
Accumulated other comprehensive loss, net (2,148) (10,597)
------------ ------------
Total stockholders' equity 8,100,738 8,180,566
------------ ------------
Total liabilities and stockholders' equity $12,954,786 $12,850,848
============ ============
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and
per adjusted claim amounts)
Three Months Ended
March 31, Percentage
----------------------- Increase/
2006 2005 (Decrease)
----------- ----------- ----------
Net revenue $8,907,250 $8,351,887 7%
Operating expenses:
Cost of revenues (a) 8,373,445 7,869,628 6%
Selling, general and administrative
expenses (b) 129,624 114,279 13%
Depreciation 25,280 24,004 5%
Amortization of intangible assets 11,599 12,083 (4%)
Integration and other related
expenses - 1,209 (100%)
----------- ----------- ----------
Operating income 367,302 330,684 11%
Interest (income) expense, net (10,874) 4,222 -
----------- ----------- ----------
Income before provision for income
taxes 378,176 326,462 16%
Provision for income taxes 149,379 128,952 16%
----------- ----------- ----------
Net income $228,797 $197,510 16%
=========== =========== ==========
Average number of common shares
outstanding - basic 443,840 450,783 (2%)
Dilutive effect of stock options
and warrants 6,521 8,570 (24%)
----------- ----------- ----------
Average number of common shares
outstanding - diluted 450,361 459,353 (2%)
=========== =========== ==========
Net income per common share -
diluted $0.51 $0.43 19%
=========== =========== ==========
Pharmacy claims:
Mail 15,056 14,303 5%
Retail 117,230 130,322 (10%)
----------- ----------- ----------
Total 132,286 144,625 (9%)
=========== =========== ==========
Adjusted Claims (Note 3) 161,755 172,550 (6%)
=========== =========== ==========
Supplemental presentation of non-
GAAP financial measures:
Gross profit (excluding allocable
depreciation) (Note 1) $533,805 $482,259 11%
=========== =========== ==========
Gross margin (excluding allocable
depreciation) (Note 1) 6.0% 5.8%
=========== ===========
EBITDA (Earnings before interest,
taxes, depreciation and
amortization) (Note 2) $404,181 $366,771 10%
=========== =========== ==========
EBITDA per adjusted claim (Notes 2
and 3) $2.50 $2.13 17%
=========== =========== ==========
(a) Excludes depreciation which is presented separately.
(b) Includes share-based compensation of $10.2 million based on FAS
123R in 2006 and $3.6 million based on APB 25 in 2005.
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
----------------------
2006 2005
----------- ----------
Cash flows from continuing operations:
Net income $228,797 $197,510
Adjustments to reconcile net income to net
cash provided by
continuing operations:
Deferred income taxes (4,667) 116,621
Depreciation and amortization 36,879 36,087
Share-based compensation 10,216 3,576
Non-cash interest expense 514 727
Write-off of deferred financing costs - 686
Other non-cash expenses, net 672 11
Changes in operating assets and liabilities,
net of effects of
acquisitions/disposals of businesses 91,974 (88,206)
----------- ----------
Net cash provided by continuing operations 364,385 267,012
Cash flows from investing activities:
Purchase of short-term investments (216,346) (468,407)
Sale of short-term investments 142,426 168,674
Capital expenditures, net (28,793) (27,043)
----------- ----------
Net cash used in investing activities (102,713) (326,776)
Cash flows from financing activities:
Repayments under credit facilities - (147,000)
Proceeds from stock issued under equity-based
compensation plans 26,352 18,578
Excess tax benefit from share-based
compensation 43,880 -
Purchase of treasury stock (401,161) (79,648)
----------- ----------
Net cash used in financing activities (330,929) (208,070)
Cash used in discontinued operations -
operating activities (973) (1,051)
----------- ----------
Net decrease in cash and cash equivalents (70,230) (268,885)
Cash and cash equivalents - beginning of
period 1,268,883 1,078,803
----------- ----------
Cash and cash equivalents - end of period $1,198,653 $809,918
=========== ==========
Caremark Rx, Inc.
Notes to Press Release Tables
March 31, 2006
(1)Our presentation of gross profit and gross margin excludes
depreciation, which is presented separately on our statements of
income. Gross profit and gross margin excluding depreciation can
be reconciled to gross profit and gross margin calculated in
accordance with SEC guidelines as follows (in thousands):
Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
Gross profit $511,847 $461,940
Allocable depreciation 21,958 20,319
----------- -----------
Gross profit excluding allocable
depreciation $533,805 $482,259
=========== ===========
Gross margin 5.7% 5.5%
Allocable depreciation 0.3% 0.3%
----------- -----------
Gross margin excluding allocable
depreciation 6.0% 5.8%
=========== ===========
(2)We believe that EBITDA is a supplemental measurement tool used by
analysts and investors to help evaluate a company's overall
operating performance, its ability to incur and service debt and
its capacity for making capital expenditures. We use EBITDA, in
addition to operating income and cash flows from operating
activities, to assess our performance and believe that it is
important for investors to be able to evaluate our company using
the same measures used by our management. EBITDA can be reconciled
to net cash provided by continuing operations, which we believe to
be the most directly comparable financial measure calculated and
presented in accordance with GAAP, as follows (in thousands):
Three Months Ended
March 31,
-----------------------
2006 2005
--------- ----------
Net income $228,797 $197,510
Depreciation 25,280 24,004
Amortization of intangible assets 11,599 12,083
Interest (income) expense, net (10,874) 4,222
Provision for income taxes 149,379 128,952
--------- ----------
EBITDA 404,181 366,771
Cash interest receipts 18,503 5,708
Cash tax payments (42,444) (3,980)
Other non-cash expenses 10,888 3,587
Other changes in operating assets and
liabilities, net of
acquisitions/disposals of businesses (26,743) (105,074)
--------- ----------
Net cash provided by continuing
operations $364,385 $267,012
========= ==========
EBITDA does not represent funds available for our discretionary use
and is not intended to represent or to be used as a substitute for
net income or cash flow from operations data as measured under
GAAP. The items excluded from EBITDA are significant components of
our statement of income and must be considered in performing a
comprehensive assessment of our overall financial performance.
EBITDA and the associated year-to-year trends should not be
considered in isolation. Our calculation of EBITDA may not be
consistent with calculations of EBITDA used by other companies.
(3) Adjusted pharmacy claims normalize the claims volume statistic for
the difference in average days' supply for mail and retail claims.
Adjusted pharmacy claims are calculated by multiplying 90-day
claims (the majority of total mail claims) by 3 and adding the
30-day claims (retail claims) to the product.
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion