CVS' Q4 driven by same-store sales, Maintenance Choice

Front-end, pharmacy sales up, PBM posts loss

WOONSOCKET, R.I. — CVS Caremark announced on Thursday an increase in fourth-quarter same-store sales and a boost in retail pharmacy revenues as pharmacy comparable-store sales benefited from the Maintenance Choice program.

"I'm pleased with our earnings this quarter, which were in line with our expectations. Our retail business continued to produce industry-leading same-store sales and achieved an all-time record operating margin," stated Larry Merlo, who currently serves as president and COO and will be taking the reins as CEO in March.

"The [pharmacy benefit management] business made significant progress last year, with a strong 2011 selling season, high client-retention rates and the introduction of unique products and services that leverage our combined retail and PBM assets," Merlo added.

Retail pharmacy segment revenues for the three-month period ended Dec. 31, 2010, rose 3.1% to $14.9 billion, compared with the prior year's period. Same-store sales increased 1.7% as front-end same-store sales increased by 1% and pharmacy same-store sales increased 2%, reflecting a positive impact from Maintenance Choice of roughly 220 basis points on a net basis.

The PBM segment posted a 9.7% decrease in revenues to $12.2 billion for the quarter compared with the prior year's period. Adjusting for the impact of new generics, net revenues would have declined by 2.4% in the segment. The decrease in net revenues primarily was due to the previously announced termination of a few large client contracts, effective Jan. 1, 2010, as well as the decrease of covered lives under the PBM's Medicare Part D program resulting from the 2010 Medicare Part D competitive bidding process.

Net revenues for the quarter decreased 4.1% to $24.8 billion. Net income totaled $1.03 billion compared with $1.05 billion in the year-ago period.

For 2011, the company expected to generate free cash flow of $4 billion to $4.2 billion, up from $3.3 billion in free cash flow generated in 2010.

Adjusted diluted earnings per share from continuing operations are expected to be between $2.72 and $2.82 for 2011.

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