Caremark Rx, Inc. Reports Record First-Quarter Results; 34% Increase in Revenue; 46% Increase in EBITDA; 37% Increase in Cash Flow from Operations.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)--April 29, 2003 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 revenues and cash flow for the first quarter of 2003. For the quarter ended March 31, 2003, the company reported revenues of $2.16 billion, an increase of 34% over the $1.61 billion of revenues recorded during the first quarter of 2002. 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) for the quarter was $126.0 million, an increase of 46% over the $86.4 million recorded during the same period of 2002. Cash flow from continuing operations totaled $137.7 million, an increase of 37% over the $100.5 million generated during the same period of 2002. Operating Results Driven by strong performance across all areas of the business, net revenue totaled $2.16 billion, a 34% increase from $1.61 billion for the same period in 2002. Based on a 40% effective tax rate, 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 totaled $.24 for the quarter. The $.24 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 for the first quarter of 2003 compares to $.15 per share for the same period of 2002 using a 40% effective tax rate, representing an increase of 60%. The reported EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. for 2002 was $.24, which was reported using a 7.5% effective tax rate. EBITDA increased by 46% to $126.0 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 46% to $116.1 million from the comparable quarter last year. EBITDA margin expanded to 5.8% from 5.4% in 2002. Caremark generated $137.7 million in cash flow from continuing operations in the first quarter of 2003 as compared with $100.5 million in the same quarter last year. This increase can primarily be attributed to the company's strong growth in cash earnings and continued effective management of working capital. Caremark repurchased 365,000 of its common shares for an aggregate consideration of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $6.1 million during the first quarter of 2003 under its stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program. On an aggregate basis, the company has repurchased almost 1.9 million of its common shares for approximately $28.8 million since the program was launched in the third quarter of 2002. Caremark's net debt at March 31, 2003, totaled $297.5 million, a decrease of $93.8 million since December December: see month. 31, 2002. The company's cash balance at March 31, 2003 stood at $400.0 million while its net debt to EBITDA ratio (based on the last twelve months of EBITDA) was .7 times at the end of the first quarter. Mail-order mail order n. An order for goods to be shipped through the mail.  -or prescriptions, including 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. distribution, totaled 6.0 million, a 22% increase from 4.9 million scripts reported in the first quarter of 2002. Mail-order prescriptions represented 21% of all prescriptions processed during the quarter, or 44% of all prescriptions processed on a retail-adjusted basis. Retail claims for the period totaled 22.3 million, up from 17.8 million during the first quarter of last year, a 25% increase. "The company continues to demonstrate its ability to achieve outstanding financial results while providing value to its customers and their participants," said Mac Crawford, Chairman of the Board and Chief Executive Officer of Caremark Rx, Inc. "Strong growth in revenues from our base business combined with our record new business wins for 2003 led to significant increases in our prescriptions processed and resulting revenue in the first quarter. Once again, we were able to convert this top line performance into substantial EBITDA and cash flow gains for our shareholders." Guidance In February February: see month. of this year, the company indicated that 2003 revenues were expected to increase between 25 and 30 percent and 2003 earnings per share were anticipated to be in the range of $1.02 and $1.04. The company expects 2003 revenues and earnings per share to be at the high end of the previous guidance. Conference Call As previously announced, Caremark will hold a conference call to discuss first-quarter earnings. The details of the call are as follows: Date: Tuesday Tuesday: see week. , April 29, 2003 Time: 10:30 a.m. Eastern Time Telephone Number: 913/981-5528 Leader: Mac Crawford Replay Number: 719/457-0820 Passcode: 595349 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. Web site at www.caremarkrx.com and will be available for two weeks. RealPlayer A multimedia player from RealNetworks that plays RealAudio and RealVideo transmissions. Included is the technology (see RealJukebox) for organizing music files and creating MP3 files from audio CDs. or Windows Media Microsoft's audio and video framework for Windows, which embraces playback, encoding and streaming. Windows Media Player is the digital jukebox and media player that comes with every version of Windows. will be required in order to listen to the webcast. A link to a free download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. will be available at www.caremarkrx.com. A taped replay of the call will also be available beginning at 1:30 p.m. Eastern Time on Tuesday, April 29, 2003, until 5:00 p.m. Eastern Time, May 6, 2003, by calling the replay number listed above. About Caremark Rx, Inc. Caremark Rx, Inc. is a leading pharmaceutical services company, providing comprehensive drug benefit services through its affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. Caremark Inc. to over 1,200 health plan sponsors and their 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 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. 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 , four state-of-the-art mail service pharmacies, the industry's only FDA-regulated repackaging plant and nineteen 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 earnings per share projections and expected revenues for the company in 2003, 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, 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 31, 2002. This presentation includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, we have provided, in the footnotes to the tables attached hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. , a reconciliation of those measures to the most directly comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures. 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)
March 31, Dec. 31,
2003 2002
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 399,989 $ 306,804
Accounts receivable, net 575,152 506,919
Inventories 160,693 200,412
Deferred tax asset, net 208,381 201,738
Prepaid expenses and other current
assets 11,518 7,987
Current assets of discontinued
operations 1,694 1,785
------------- -------------
Total current assets 1,357,427 1,225,645
Property and equipment, net 146,398 139,002
Intangible assets, net 60,784 61,604
Deferred tax asset, net 369,890 412,588
Other assets 71,441 72,034
Non-current assets of discontinued
operations 1,843 1,867
------------- -------------
Total assets $ 2,007,783 $ 1,912,740
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 297,773 $ 294,758
Claims and discounts payable 421,776 370,031
Other accrued expenses and liabilities 174,793 180,685
Income taxes payable 1,641 3,409
Current portion of long-term debt 2,500 2,500
Current liabilities of discontinued
operations 11,211 25,622
------------- -------------
Total current liabilities 909,694 877,005
Long-term debt, net of current portion 695,000 695,625
Other long-term liabilities 82,601 82,417
------------- -------------
Total liabilities 1,687,295 1,655,047
Commitments and contingencies
Stockholders' equity:
Common stock 263 263
Additional paid-in capital 1,670,561 1,665,155
Treasury stock (28,782) (22,671)
Shares held in trust (102,461) (102,948)
Accumulated deficit (1,209,058) (1,272,071)
Accumulated other comprehensive loss (10,035) (10,035)
------------- -------------
Total stockholders' equity 320,488 257,693
------------- -------------
Total liabilities and stockholders'
equity $ 2,007,783 $ 1,912,740
============= =============
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
-----------------------------
2003 2002
------------- -------------
Net revenue $ 2,163,796 $ 1,614,117
Operating expenses:
Cost of revenues (a) 1,991,701 1,490,850
Selling, general and administrative
expenses 46,103 36,842
Depreciation and amortization 9,876 6,692
------------- -------------
Operating income (EBIT) 116,116 79,733
Interest expense, net 11,094 12,171
------------- -------------
Income before provision for income taxes 105,022 67,562
Provision for income taxes (1) 42,009 5,067
------------- -------------
Net income 63,013 62,495
Preferred security dividends (2) - 3,304
------------- -------------
Net income to common stockholders $ 63,013 $ 59,191
============= =============
Average number of common shares
outstanding - basic 255,332 226,824
Dilutive effect of stock options 6,449 10,327
Convertible Preferred Securities (2) - 26,850
------------- -------------
Average number of common shares
outstanding - diluted 261,781 264,001
============= =============
Net income per common share - diluted $ 0.24 $ 0.24
============= =============
Supplemental presentation of non-GAAP
financial measures:
Net income per common share - diluted
(at 40% effective income tax rate (1) $ 0.24 $ 0.15
============= =============
EBITDA (Earnings before interest,
taxes, depreciation and amortization)
(3) $ 125,992 $ 86,425
============= =============
(a) Excludes depreciation which is presented separately. See note 5.
CAREMARK RX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
-----------------------------
2003 2002
------------- -------------
Cash flows from continuing operations:
Net income $ 63,013 $ 62,495
Adjustments to reconcile net income to
net cash provided by continuing
operations:
Deferred income taxes 37,323 -
Depreciation and amortization 9,876 6,692
Non-cash interest expense 903 706
Other non-cash expenses 397 -
Changes in operating assets and
liabilities, net of effects of
acquisitions of businesses 26,220 30,560
------------- -------------
Net cash provided by continuing
operations 137,732 100,453
Cash flows from investing activities:
Capital expenditures, net (18,105) (6,902)
Cash flows from financing activities:
Proceeds from issuance of equity
securities, net 4,227 7,990
Purchase of treasury stock (6,111) -
Net repayments under credit facility (625) (625)
Long-term debt issuance costs (100) (123)
Dividend payments on Convertible
Preferred Securities - (3,500)
------------- -------------
Net cash provided by (used in)
financing activities (2,609) 3,742
Cash used in discontinued operations (23,833) (15,237)
------------- -------------
Net increase in cash and cash
equivalents 93,185 82,056
Cash and cash equivalents - beginning
of period 306,804 159,066
------------- -------------
Cash and cash equivalents - end of
period $ 399,989 $ 241,122
============= =============
CAREMARK RX, INC. AND SUBSIDIARIES
SELECTED STATISTICS AND RATIOS
(In millions, except per adjusted claim amounts)
Three Months Ended
March 31,
---------------------- Percentage
2003 2002 Increase
---------- ---------- ----------
Claims Processed
Mail 6.0 4.9 22%
Retail 22.3 17.8 25%
---------- ---------- ----------
Total 28.3 22.7 25%
========== ========== ==========
Adjusted Claims (4) 39.7 32.1 24%
========== ========== ==========
Per Adjusted Claim
Gross Profit (excluding
depreciation) (5) $4.33 $3.84 13%
========== ========== ==========
EBITDA (3) $3.17 $2.69 18%
========== ========== ==========
March 31, Dec. 31,
2003 2002
---------- ----------
Balance Sheet Debt
Term Loans $247.5 $248.1
Senior Notes 450.0 450.0
---------- ----------
Total 697.5 698.1
Cash and cash equivalents 400.0 306.8
---------- ----------
Net Debt (6) $297.5 $391.3
========== ==========
LTM EBITDA (7) $450.1 $410.5
========== ==========
Net Debt to LTM EBITDA (6)(7) 0.7x 1.0x
========== ==========
(1) In the fourth quarter of 2002, we reduced the valuation allowance
on our net deferred income tax asset to reflect a change in
management's assessment of the amount expected to be utilized to
offset future amounts of taxable income. This change resulted in
our recording the provision for income taxes at different rates in
the 2003 (40%) and 2002 (7.5%) periods presented above; however,
there was no impact on the actual taxes we expect to pay. We have
included a non-GAAP calculation of 2002 earnings per share as if
we had reduced this valuation allowance prior to 2002 to enable
investors to more easily compare earnings per share for the
periods presented above. GAAP net income per common share --
diluted can be reconciled to this measure as follows:
Three Months Ended
March 31,
-----------------------------
2003 2002
------------- -------------
Net income per common share - diluted $ 0.24 $ 0.24
Incremental tax provision per diluted
common share -- (0.09)
------------- -------------
Net income per common share - diluted
(at 40% effective income tax rate) $ 0.24 $ 0.15
============= =============
(2) Our Convertible Preferred Securities were presumed to have been
converted to common stock at the beginning of the 2002 period
under the "if-converted" method of computing common stock
equivalents. In October 2002, these Convertible Preferred
Securities were converted into 26,850,000 shares of common stock.
This conversion had no impact on the number of shares included in
the average number of common shares outstanding -- diluted for
either period.
(3) 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,
-----------------------------
2003 2002
------------- -------------
Operating income (EBIT) $ 116,116 $ 79,733
Depreciation and amortization 9,876 6,692
------------- -------------
EBITDA 125,992 86,425
Cash interest payments, net of interest
income (1,782) (3,224)
Cash tax payments, net of refunds (6,453) (2,943)
Other non-cash expenses 397 --
Other changes in operating assets and
liabilities, net of acquisitions and
disposals of businesses 19,578 20,195
------------- -------------
Net cash provided by continuing
operations $ 137,732 $ 100,453
============= =============
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 operations 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.
(4) Adjusted pharmacy claims normalize the claims volume statistic for
the difference in 90-days' supply for mail claims and 30-days'
supply for retail claims. Adjusted pharmacy claims are calculated
by multiplying 90-day claims by 3 and adding the 30-day claims to
the product.
(5) We have historically excluded depreciation from our cost of
revenues and, hence, from our computation of Gross Profit (net
revenue minus cost of revenues); however, SEC rules require the
inclusion of depreciation expense in gross profit. Therefore, the
amount of Gross Profit used to compute the Gross Profit per
adjusted claim statistic presented above is a non-GAAP measurement
as defined by the SEC's Regulation G. Our management measures our
results of operations using both EBITDA (see note 3 above) and
cash flows from operating activities, both of which exclude
depreciation, and with Operating Income (EBIT), which includes
depreciation. As previously mentioned, we believe that it is
important for investors to be able to evaluate our company using
the same measures used by our management; therefore, we have used
our internal calculation of Gross Profit to compute the Gross
Profit per adjusted claim statistic above. This amount reconciles
to gross profit calculated under SEC rules (GAAP gross profit) as
follows (in thousands except per adjusted claim amounts):
Three Months Ended
March 31,
-----------------------------
2003 2002
------------- -------------
Net revenue $ 2,163,796 $ 1,614,117
Cost of revenues (excluding depreciation
expense) 1,991,701 1,490,850
------------- -------------
Gross Profit 172,095 123,267
Depreciation expense allocated to cost of
revenues 8,601 5,404
------------- -------------
GAAP gross profit $ 163,494 $ 117,863
------------- -------------
GAAP gross profit per adjusted claim $ 4.12 $ 3.67
============= =============
(6) Net debt is a non-GAAP financial measure and equals total
indebtedness minus cash and cash equivalents. We use net debt as
the numerator in our "net debt to LTM EBITDA" ratio, which is the
primary coverage ratio reviewed by management, in order to reflect
the availability of the cash and cash equivalents on our balance
sheet for use in debt service.
(7) LTM EBITDA is a non-GAAP financial measure representing our EBITDA
generated in the last twelve months. We use LTM EBITDA as the
denominator in our "net debt to LTM EBITDA" coverage ratio to
reflect management's view of our capacity to service debt. LTM
EBITDA is subject to all of the limitations concerning our
presentation of EBITDA described in note 3 above. LTM EBITDA can
be reconciled to net cash provided by continuing operations over
the last twelve months, which we believe to be the most directly
comparable financial measure calculated and presented in
accordance with GAAP, as follows (in thousands):
Twelve Months Ended
-----------------------------
March 31, Dec. 31,
2003 2002
------------- -------------
Operating income (EBIT) $ 416,985 $ 380,602
Depreciation and amortization 33,112 29,928
------------- -------------
EBITDA 450,097 410,530
Cash interest payments, net of interest
income (41,925) (43,367)
Cash tax payments, net of refunds (10,628) (7,118)
Other non-cash expenses 1,460 1,063
Other changes in operating assets and
liabilities, net of acquisitions and
disposals of businesses 46,706 47,323
------------- -------------
Net cash provided by continuing
operations $ 445,710 $ 408,431
============= =============
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