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CVS HEALTH CORPORATION

(CVS)
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Delayed Nyse  -  04:00 2022-12-08 pm EST
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CVS Health : Reports First Quarter Results; Confirms 2017 EPS Guidance

05/02/2017 | 06:56am EST

WOONSOCKET, R.I., May 2, 2017 /PRNewswire/ --

First Quarter Year-over-year Highlights:

    --  Net revenues increased 3.0% to $44.5 billion
    --  GAAP diluted EPS from continuing operations of $0.92; Adjusted EPS of
        $1.17
    --  Generated cash flow from operations of $3.5 billion; free cash flow of
        $3.1 billion

2017 Guidance:

    --  Confirmed full year GAAP diluted EPS from continuing operations of $5.02
        to $5.18
    --  Confirmed full year Adjusted EPS of $5.77 to $5.93
    --  Provided second quarter GAAP diluted EPS from continuing operations of
        $1.15 to $1.19
    --  Provided second quarter Adjusted EPS of $1.29 to $1.33
    --  Confirmed full year cash flow from operations of $7.7 to $8.6 billion;
        free cash flow of $6.0 to $6.4 billion

CVS Health Corporation (NYSE: CVS) today announced operating results for the three months ended March 31, 2017.

President and Chief Executive Officer Larry Merlo said, "2017 is off to a solid start as we posted results this quarter that surpassed our expectations. At the same time, we generated $3.1 billion of free cash and continued to return value to our shareholders through high-return investments in our business as well as dividends and share repurchases. However, while we are pleased with our financial performance versus our expectations, we won't be satisfied until the company returns to sustainable, healthy earnings growth."

Mr. Merlo continued, "We continue to expect 2017 to be a rebuilding year, but our goals remain clear, and we fully intend to return to healthy levels of growth. We remain confident in our model as well as our position in the evolving health care landscape, and our ability to generate significant levels of cash will continue to play an important role in driving shareholder value over the longer term."

Revenues

Net revenues for the three months ended March 31, 2017 increased 3.0%, or $1.3 billion, to $44.5 billion, up from $43.2 billion in the three months ended March 31, 2016.

Revenues in the Pharmacy Services Segment increased 8.5% to $31.2 billion in the three months ended March 31, 2017. This increase was primarily driven by growth in pharmacy network claim volume as well as brand inflation and growth in specialty pharmacy, partially offset by increased generic dispensing and price compression. Pharmacy network claims processed during the three months ended March 31, 2017, increased 10.5%, on a 30-day equivalent basis, to 376.8 million, compared to 340.9 million in the prior year. The increase in pharmacy network claim volume was primarily due to an increase in net new business. Mail choice claims processed during the three months ended March 31, 2017, increased 4.5%, on a 30-day equivalent basis, to 63.7 million, compared to 61.0 million in the prior year. The increase in the mail choice claim volume was primarily driven by continued adoption of our Maintenance Choice(®) offerings and an increase in specialty pharmacy claims.

Revenues in the Retail/LTC Segment decreased 3.8% to $19.3 billion in the three months ended March 31, 2017. The decrease was largely driven by a 4.7% decrease in same store sales, continued reimbursement pressure and an increase in the generic dispensing rate.

Pharmacy same store sales decreased 4.7% and were negatively impacted by approximately 480 basis points due to recent generic introductions. Same store prescription volumes declined 1.4%, on a 30-day equivalent basis, in the three months ended March 31, 2017. The previously-discussed marketplace changes that restrict CVS Pharmacy from participating in certain networks had an approximately 460 basis point negative impact on same store prescription volumes, while the absence of leap day versus the prior year had an approximately120 basis point negative impact on same store prescription volumes. Adjusting for both the network changes and leap day, same store prescription volumes would have been 580 basis points higher, and would have increased 4.4% in the quarter on a 30-day equivalent basis.

Front store same store sales declined 4.9% in the three months ended March 31, 2017. The absence of leap day versus the prior year had a 100 basis point negative impact on front store same store sales, while the shift of the Easter holiday to the second quarter in 2017 from the first quarter in 2016 had a 75 basis point negative impact. Front store sales were also negatively impacted by softer customer traffic and efforts to rationalize promotional strategies, partially offset by an increase in basket size.

For the three months ended March 31, 2017, the generic dispensing rate increased approximately 140 basis points to 87.0% in our Pharmacy Services Segment and increased approximately 180 basis points to 87.5% in our Retail/LTC Segment, compared to the prior year.

Operating Profit

For the three months ended March 31, 2017, consolidated operating profit decreased $392 million, or 18.0%. The decrease was due to the previously-announced restricted networks that exclude CVS Pharmacy as well as continued price compression in the Pharmacy Services Segment and continued reimbursement pressure in the Retail/LTC Segment. The decrease also reflects a charge of $199 million associated with the closure of 60 retail stores in connection with our enterprise streamlining initiative. This was partially offset by a $46 million decrease in acquisition-related integration costs in the three months ended March 31, 2017 versus the same quarter last year.

Net Income and Earnings Per Share

Net income for the three months ended March 31, 2017 decreased 16.9%, to $953 million. This was primarily driven by the decline in operating profit, partially offset by lower interest expense of $31 million related to refinancing activity in the prior year as well as the improvement in the effective income tax rate, from 39.4% to 37.3%. The decrease in the tax rate was largely driven by $19 million in discrete tax benefits related to the required adoption of new accounting guidance for share-based compensation.

GAAP earnings per diluted share from continuing operations ("GAAP diluted EPS") for the three months ended March 31, 2017 was $0.92, compared to $1.04 in the prior year. Adjusted earnings per share ("Adjusted EPS") for the three months ended March 31, 2017 and 2016, was $1.17 and $1.18, respectively. Further detail is shown in the Adjusted Earnings Per Share reconciliation later in this release.

Guidance

The Company confirmed its previous EPS and cash flow guidance for the full year and provided guidance for the second quarter of 2017. The Company continues to expect to deliver GAAP diluted EPS of $5.02 to $5.18 and Adjusted EPS of $5.77 to $5.93 for the full year 2017. The Company expects to deliver GAAP diluted EPS of $1.15 to $1.19 and Adjusted EPS of $1.29 to $1.33 in the second quarter of 2017. The Company also confirmed its 2017 cash flow from operations guidance of $7.7 to $8.6 billion and free cash flow guidance of $6.0 to $6.4 billion. These 2017 guidance estimates assume the completion of $5.0 billion in share repurchases.

Real Estate Program

During the three months ended March 31, 2017, the Company opened 27 new retail stores and closed 60 retail stores. In addition, the Company relocated 10 retail stores. As of March 31, 2017, the Company operated 9,676 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.

As previously disclosed, the Company intends to close a total of approximately 70 retail stores during 2017 and expects to take a cumulative charge of approximately $220 million primarily associated with the remaining lease obligations of such stores. The Company closed 60 of the 70 retail stores in the three months ended March 31, 2017 and took a charge of $199 million. The Company expects to close approximately ten additional stores during the remainder of 2017.

Teleconference and Webcast

The Company will be holding a conference call today for the investment community at 8:30 am (EDT) to discuss its quarterly results. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast will be archived and available on the website for a one-year period following the conference call.

About the Company

CVS Health is a pharmacy innovation company helping people on their path to better health. Through its nearly 9,700 retail locations, more than 1,100 walk-in medical clinics, a leading pharmacy benefits manager with nearly 90 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year, expanding specialty pharmacy services, and a leading stand-alone Medicare Part D prescription drug plan, the company enables people, businesses and communities to manage health in more affordable and effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs. Find more information about how CVS Health is shaping the future of health at https://www.cvshealth.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. By their nature, all forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons as described in our Securities and Exchange Commission filings, including those set forth in the Risk Factors section and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

-- Tables Follow --


                                                                            CVS HEALTH CORPORATION

                                                                 Condensed Consolidated Statements of Income

                                                                                 (Unaudited)



                                                                                                             Three Months Ended

                                                                                                                 March 31,
                                                                                                                 ---------

    In millions, except per share amounts                                                                                  2017         2016 (1)
    -------------------------------------                                                                                  ----          -------


    Net revenues                                                                                                                $44,514            $43,215

    Cost of revenues                                                                                                             37,934             36,471
                                                                                                                                 ------             ------

    Gross profit                                                                                                                  6,580              6,744

    Operating expenses                                                                                                            4,787              4,559
                                                                                                                                  -----              -----

    Operating profit                                                                                                              1,793              2,185

    Interest expense, net                                                                                                           252                283

    Other expense                                                                                                                     7                  9
                                                                                                                                    ---                ---

    Income before income tax provision                                                                                            1,534              1,893

    Income tax provision                                                                                                            572                746
                                                                                                                                    ---                ---

    Income from continuing operations                                                                                               962              1,147

    Loss from discontinued operations, net of tax                                                                                   (9)                 -
                                                                                                                                    ---                ---

    Net income                                                                                                                      953              1,147

    Net income attributable to noncontrolling interest                                                                              (1)               (1)
                                                                                                                                    ---                ---

    Net income attributable to CVS Health                                                                                          $952             $1,146
                                                                                                                                   ====             ======


    Basic earnings per share:

    Income from continuing operations attributable to CVS Health                                                                  $0.93              $1.04

    Loss from discontinued operations attributable to CVS Health                                                                $(0.01)          $      -

    Net income attributable to CVS Health                                                                                         $0.92              $1.04

    Weighted average shares outstanding                                                                                           1,030              1,092

    Diluted earnings per share:

    Income from continuing operations attributable to CVS Health                                                                  $0.92              $1.04

    Loss from discontinued operations attributable to CVS Health                                                                $(0.01)          $      -

    Net income attributable to CVS Health                                                                                         $0.92              $1.04

    Weighted average shares outstanding                                                                                           1,035              1,099

    Dividends declared per share                                                                                                  $0.50             $0.425

    ________________________

             (1)    During the three months ended March 31, 2017, the
                     Company adopted Accounting Standards Update ("ASU")
                     2017-07, Improving the Presentation of Net Periodic
                     Pension Cost and Net Periodic Postretirement Benefit
                     Cost, which resulted in a retrospective
                     reclassification of $9 million of net benefit costs
                     from operating expenses to other expense in the three
                     months ended March 31, 2016.


                                                                                                      CVS HEALTH CORPORATION

                                                                                              Condensed Consolidated Balance Sheets

                                                                                                           (Unaudited)



                                                                                                                               March 31,           December 31,

    In millions, except per share amounts                                                                                            2017                   2016
    -------------------------------------                                                                                            ----                   ----


    Assets:

    Cash and cash equivalents                                                                                                               $2,217                  $3,371

    Short-term investments                                                                                                                      85                      87

    Accounts receivable, net                                                                                                                12,114                  12,164

    Inventories                                                                                                                             14,306                  14,760

    Other current assets                                                                                                                       735                     660
                                                                                                                                               ---                     ---

     Total current assets                                                                                                                   29,457                  31,042

    Property and equipment, net                                                                                                             10,057                  10,175

    Goodwill                                                                                                                                38,263                  38,249

    Intangible assets, net                                                                                                                  13,390                  13,511

    Other assets                                                                                                                             1,503                   1,485
                                                                                                                                             -----                   -----

    Total assets                                                                                                                           $92,670                 $94,462
                                                                                                                                           =======                 =======


    Liabilities:

    Accounts payable                                                                                                                        $7,344                  $7,946

    Claims and discounts payable                                                                                                             9,453                   9,451

    Accrued expenses                                                                                                                         8,680                   6,937

    Short-term debt                                                                                                                          1,768                   1,874

    Current portion of long-term debt                                                                                                           43                      42
                                                                                                                                               ---                     ---

     Total current liabilities                                                                                                              27,288                  26,250

    Long-term debt                                                                                                                          25,622                  25,615

    Deferred income taxes                                                                                                                    4,214                   4,214

    Other long-term liabilities                                                                                                              1,704                   1,549


    Shareholders' equity:

    CVS Health shareholders' equity:

    Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding                                                          -                      -

    Common stock, par value $0.01: 3,200 shares authorized; 1,707 shares issued and 1,027 shares outstanding
     at March 31, 2017 and 1,705 shares issued and 1,061 shares outstanding at December 31, 2016                                                17                      17

    Treasury stock, at cost: 679 shares at March 31, 2017 and 643 shares at December 31, 2016                                             (36,306)               (33,452)

    Shares held in trust: 1 share at March 31, 2017 and December 31, 2016                                                                     (31)                   (31)

    Capital surplus                                                                                                                         31,034                  31,618

    Retained earnings                                                                                                                       39,419                  38,983

    Accumulated other comprehensive income (loss)                                                                                            (296)                  (305)
                                                                                                                                              ----                    ----

    Total CVS Health shareholders' equity                                                                                                   33,837                  36,830

    Noncontrolling interest                                                                                                                      5                       4
                                                                                                                                               ---                     ---

     Total shareholders' equity                                                                                                             33,842                  36,834
                                                                                                                                            ------                  ------

    Total liabilities and shareholders' equity                                                                                             $92,670                 $94,462
                                                                                                                                           =======                 =======


                                                    CVS HEALTH CORPORATION

                                       Condensed Consolidated Statements of Cash Flows

                                                         (Unaudited)



                                            Three Months Ended

                                                March 31,
                                                ---------

    In millions                                           2017                           2016 (1)
    -----------                                           ----                            -------

    Cash flows from operating
     activities:

    Cash receipts from customers                                                 $43,913            $41,482

    Cash paid for inventory and
     prescriptions dispensed by retail
     network pharmacies                                                         (36,178)          (35,575)

    Cash paid to other suppliers and
     employees                                                                   (3,823)           (2,934)

    Interest received                                                                  6                  5

    Interest paid                                                                  (328)             (378)

    Income taxes paid                                                               (57)             (161)
                                                                                     ---               ----

    Net cash provided by operating
     activities                                                                    3,533              2,439
                                                                                   -----              -----


    Cash flows from investing
     activities:

    Purchases of property and
     equipment                                                                     (457)             (598)

    Proceeds from sale of property and
     equipment and other assets                                                        5                  2

    Acquisitions (net of cash
     acquired) and other investments                                               (110)              (51)

    Purchase of available-for-sale
     investments                                                                       -              (36)

    Maturity of available-for-sale
     investments                                                                       8                 50
                                                                                     ---                ---

    Net cash used in investing
     activities                                                                    (554)             (633)
                                                                                    ----               ----


    Cash flows from financing
     activities:

    Decrease in short-term debt                                                    (106)                 -

    Purchase of noncontrolling
     interest in subsidiary                                                            -              (39)

    Dividends paid                                                                 (516)             (470)

    Proceeds from exercise of stock
     options                                                                         121                104

    Payments for taxes related to net
     share settlement of equity awards                                              (11)              (12)

    Repurchase of common stock                                                   (3,621)           (2,066)

    Other                                                                              -               (4)
                                                                                     ---               ---

    Net cash used in financing
     activities                                                                  (4,133)           (2,487)
                                                                                  ------             ------

    Effect of exchange rate changes on
     cash and cash equivalents                                                         -                 1
                                                                                     ---               ---

    Net decrease in cash and cash
     equivalents                                                                 (1,154)             (680)

    Cash and cash equivalents at the
     beginning of the period                                                       3,371              2,459
                                                                                   -----              -----

    Cash and cash equivalents at the
     end of the period                                                            $2,217             $1,779
                                                                                  ======             ======


    Reconciliation of net income to
     net cash provided by operating
     activities:

    Net income                                                                      $953             $1,147

    Adjustments required to reconcile
     net income to net cash provided
     by operating activities:

    Depreciation and amortization                                                    619                617

    Stock-based compensation                                                          55                 57

    Deferred income taxes and other
     noncash items                                                                    14                 17

    Change in operating assets and
     liabilities, net of effects from
     acquisitions:

    Accounts receivable, net                                                          48            (1,131)

    Inventories                                                                      456                 89

    Other current assets                                                            (74)               106

    Other assets                                                                     (1)              (52)

    Accounts payable and claims and
     discounts payable                                                             (539)               798

    Accrued expenses                                                               1,848                768

    Other long-term liabilities                                                      154                 23
                                                                                     ---                ---

    Net cash provided by operating
     activities                                                                   $3,533             $2,439
                                                                                  ======             ======

    ________________________

             (1)    During the three months ended March 31, 2017, the
                     Company adopted ASU 2016-09, Improvements to
                     Employee Share-Based Payment Accounting, which
                     resulted in a retrospective reclassification of $27
                     million of excess tax benefits from financing
                     activities to operating activities which increased
                     net cash provided by operating activities and
                     increased cash used in financing activities for the
                     three months ended March 31, 2016.

Non-GAAP Financial Measures

The following provides reconciliations of certain non-GAAP financial measures presented in this Form 8-K to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company uses the non-GAAP measures "Adjusted EPS" and "Free Cash Flow" to assess and analyze underlying business performance and trends. Management believes that providing these non-GAAP measures enhances investors' understanding of the Company's performance.

The Company defines Adjusted Earnings per Share, or Adjusted EPS, as income from continuing operations excluding the impact of certain adjustments such as the amortization of intangible assets, acquisition-related transaction and integration costs, adjustments to legal reserves in connection with certain legal settlements, charges in connection with store rationalization, losses on early extinguishments of debt, and losses on settlements of defined benefit pension plans, divided by the Company's weighted average diluted shares outstanding. The Company believes that this measure enhances investors' ability to compare the Company's past financial performance with its current performance.

The Company defines Free Cash Flow as net cash provided by operating activities less net additions to property and equipment (i.e., additions to property and equipment plus proceeds from sale-leaseback transactions). Management uses this non-GAAP financial measure for internal comparisons and finds it useful in assessing year-over-year cash flow performance.

These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Adjusted EPS should be considered in addition to, rather than as a substitute for, income before income tax provision as a measure of our performance. Free Cash Flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities as a measure of our liquidity. The Company's definitions of Adjusted EPS and Free Cash Flow may not be comparable to similarly titled measurements reported by other companies.


                                                                                             Adjusted Earnings Per Share

                                                                                                     (Unaudited)


    The following is a reconciliation of income before income tax provision to Adjusted EPS:



                                                                                                                         Three Months Ended

                                                                                                                             March 31,
                                                                                                                             ---------

    In millions, except per share amounts                                                                                              2017        2016
    -------------------------------------                                                                                              ----        ----


    Income before income tax provision                                                                                                      $1,534      $1,893

    Non-GAAP adjustments:

    Amortization of intangible assets                                                                                                          200         199

    Acquisition-related integration costs (1)                                                                                                   15          61

    Charge in connection with store rationalization (2)                                                                                        199           -

    Charge related to a disputed 1999 legal settlement                                                                                           -          3
                                                                                                                                               ---        ---

    Adjusted income before income tax provision                                                                                              1,948       2,156

    Adjusted income tax provision                                                                                                              734         847
                                                                                                                                               ---         ---

    Adjusted income from continuing operations                                                                                               1,214       1,309

    Net income attributable to noncontrolling interest                                                                                         (1)        (1)

    Adjusted income allocable to participating securities                                                                                      (5)        (7)
                                                                                                                                               ---         ---

    Adjusted income from continuing operations attributable to CVS Health                                                                   $1,208      $1,301
                                                                                                                                            ======      ======


    Weighted average diluted shares outstanding                                                                                              1,035       1,099

    Adjusted EPS                                                                                                                             $1.17       $1.18
                                                                                                                                             =====       =====

    ________________________

             (1)    In 2017, the integration costs relate to the
                     acquisition of Omnicare and in 2016, the integration
                     costs relate to the acquisitions of Omnicare and the
                     pharmacies and clinics of Target.

             (2)    Primarily represents a charge for noncancelable lease
                     obligations associated with stores closed in
                     connection with our enterprise streamlining
                     initiative.


                                                             Free Cash Flow

                                                               (Unaudited)


    The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:



                                                Three Months Ended

                                                    March 31,
                                                    ---------

    In millions                                               2017                           2016 (1)
    -----------                                               ----                            -------


    Net cash provided by
     operating activities                                                          $3,533             $2,439

    Subtract: Additions to
     property and equipment                                                         (457)             (598)
                                                                                     ----               ----

    Free cash flow                                                                 $3,076             $1,841
                                                                                   ======             ======

    ________________________

             (1)    During the three months ended March 31, 2017, the
                     Company adopted ASU 2016-09, Improvements to
                     Employee Share-Based Payment Accounting, which
                     resulted in a retrospective reclassification of $27
                     million of excess tax benefits from financing
                     activities to operating activities which increased
                     net cash provided by operating activities for the
                     three months ended March 31, 2016.


                                                                                                                                                    Supplemental Information

                                                                                                                                                          (Unaudited)


    The Company evaluates its Pharmacy Services and Retail/LTC segment performance based on net revenues, gross profit and operating profit before the effect of nonrecurring charges and gains and certain intersegment activities. The Company evaluates the performance of its
     Corporate Segment based on operating expenses before the effect of nonrecurring charges and gains and certain intersegment activities. The following is a reconciliation of the Company's segments to the accompanying consolidated financial statements:



                                                                                    Pharmacy

                                                                                    Services                              Retail/LTC                       Corporate                      Intersegment                         Consolidated

    In millions                                                                    Segment(1)                               Segment                         Segment                     Eliminations(2)                           Totals
    -----------                                                                    ---------                                -------                         -------                     ---------------                           ------

    Three Months Ended

    March 31, 2017:

      Net revenues                                                                                              $31,223                                              $19,341                            $                    -                                                   $(6,050) $44,514

      Gross profit                                                                                                1,096                                                5,676                                                 -                                                      (192)   6,580

      Operating profit (loss) (3)                                                                                   784                                                1,411                                             (226)                                                      (176)   1,793

    March 31, 2016:

      Net revenues                                                                                               28,765                                               20,112                                                 -                                                    (5,662)  43,215

      Gross profit (4)                                                                                            1,102                                                5,830                                                 -                                                      (188)   6,744

      Operating profit (loss) (4)(5)                                                                                784                                                1,784                                             (212)                                                      (171)   2,185

    ________________________

             (1)    Net revenues of the Pharmacy Services Segment include
                     approximately $3.1 billion and $3.0 billion of Retail
                     Co?Payments for the three months ended March 31, 2017
                     and 2016, respectively.

             (2)    Intersegment eliminations relate to intersegment
                     revenue generating activities that occur between the
                     Pharmacy Services Segment and the Retail/LTC
                     Segment. These occur in the following ways: when
                     members of Pharmacy Services Segment clients
                     ("members") fill prescriptions at the Company's
                     retail pharmacies to purchase covered products, when
                     members enrolled in programs such as Maintenance
                     Choice(R) elect to pick up maintenance prescriptions
                     at one of the Company's retail pharmacies instead of
                     receiving them through the mail, or when members have
                     prescriptions filled at the Company's long-term care
                     pharmacies. When these occur, both the Pharmacy
                     Services and Retail/LTC segments record the
                     revenues, gross profit and operating profit on a
                     standalone basis.

             (3)    The Retail/LTC Segment operating profit for the three
                     months ended March 31, 2017 includes a $199 million
                     charge associated with store closures and $15 million
                     of acquisition-related integration costs. The
                     integration costs are related to the acquisition of
                     Omnicare.

             (4)    The Retail/LTC Segment gross profit and operating
                     profit for the three months ended March 31, 2016
                     includes $4 million and $61 million, respectively, of
                     acquisition-related integration costs. The
                     integration costs are related to the acquisitions of
                     Omnicare and the pharmacies and clinics of Target.

             (5)    Amounts revised to reflect the adoption of ASU
                     2017-07, Improving the Presentation of Net Periodic
                     Pension Cost and Net Periodic Postretirement Benefit
                     Cost, which increased consolidated operating profit
                     by $9 million.


                                                                                                           Supplemental Information

                                                                                                                 (Unaudited)


    Pharmacy Services Segment


    The following table summarizes the Pharmacy Services Segment's performance for the respective periods:



                                                                                                                                      Three Months Ended

                                                                                                                                          March 31,
                                                                                                                                          ---------

    In millions                                                                                                                     2017                         2016
    -----------                                                                                                                     ----                         ----

    Net revenues                                                                                                                                         $31,223      $28,765

    Gross profit                                                                                                                                           1,096        1,102

    Gross profit % of net revenues                                                                                                                          3.5%        3.8%

    Operating expenses (1)                                                                                                                                   312          318

    Operating expenses % of net revenues                                                                                                                    1.0%        1.1%

    Operating profit (1)                                                                                                                                     784          784

    Operating profit % of net revenues                                                                                                                      2.5%        2.7%

    Net revenues:

    Mail choice (2)                                                                                                                                      $10,848      $10,150

    Pharmacy network (3)                                                                                                                                  20,301       18,536

    Other                                                                                                                                                     74           79

    Pharmacy claims processed (90 Day = 3 prescriptions) (4)(5):

    Total                                                                                                                                                  440.5        401.9

    Mail choice (2)                                                                                                                                         63.7         61.0

    Pharmacy network (3)                                                                                                                                   376.8        340.9

    Generic dispensing rate (4):

    Total (5)                                                                                                                                              87.0%       85.6%

    Mail choice (2)                                                                                                                                        79.2%       77.3%

    Pharmacy network (3)(5)                                                                                                                                87.7%       86.5%

    Mail choice penetration rate (4)                                                                                                                       14.5%       15.2%

    ________________________

             (1)    Amounts revised for the three months ended March 31,
                     2016 to reflect the adoption of ASU 2017-07,
                     Improving the Presentation of Net Periodic Pension
                     Cost and Net Periodic Postretirement Benefit Cost,
                     which decreased operating expenses and increased
                     operating profit by $2 million.

             (2)    Mail choice is defined as claims filled at a Pharmacy
                     Services mail facility, which includes specialty mail
                     claims inclusive of Specialty Connect(R) claims
                     filled at retail, as well as prescriptions filled at
                     our retail pharmacies under the Maintenance Choice(R)
                     program.

             (3)    Pharmacy network net revenues, claims processed and
                     generic dispensing rates do not include Maintenance
                     Choice, which are included within the mail choice
                     category. Pharmacy network is defined as claims
                     filled at retail and specialty retail pharmacies,
                     including our retail pharmacies and long-term care
                     pharmacies, but excluding Maintenance Choice
                     activity.

             (4)    Includes the adjustment to convert 90-day
                     prescriptions to the equivalent of three 30-day
                     prescriptions. This adjustment reflects the fact that
                     these prescriptions include approximately three times
                     the amount of product days supplied compared to a
                     normal prescription.

             (5)    The pharmacy claims processed and the generic
                     dispensing rate for the three months ended March 31,
                     2016 have been revised to reflect 90-day
                     prescriptions to the equivalent of three 30-day
                     prescriptions.


                                                                                                    Supplemental Information

                                                                                                          (Unaudited)


    Retail/LTC Segment


    The following table summarizes the Retail/LTC Segment's performance for the respective periods:



                                                                                                                               Three Months Ended

                                                                                                                                   March 31,
                                                                                                                                   ---------

    In millions                                                                                                              2017                         2016
    -----------                                                                                                              ----                         ----

    Net revenues                                                                                                                                  $19,341      $20,112

    Gross profit (1)                                                                                                                                5,676        5,830

    Gross profit % of net revenues                                                                                                                  29.3%       29.0%

    Operating expenses (1)(2)(3)                                                                                                                    4,265        4,046

    Operating expenses % of net revenues                                                                                                            22.1%       20.1%

    Operating profit (3)                                                                                                                            1,411        1,784

    Operating profit % of net revenues                                                                                                               7.3%        8.9%

    Prescriptions filled (90 Day = 3 prescriptions) (4)                                                                                             303.1        305.1

    Net revenue increase (decrease):

    Total                                                                                                                                          (3.8)%       18.6%

    Pharmacy                                                                                                                                       (3.8)%       23.7%

    Front Store                                                                                                                                    (3.9)%        2.6%

    Total prescription volume (90 Day = 3 prescriptions) (4)                                                                                       (0.6)%       16.0%

    Same store sales increase (decrease) (5):

    Total                                                                                                                                          (4.7)%        4.2%

    Pharmacy                                                                                                                                       (4.7)%        5.5%

    Front Store                                                                                                                                    (4.9)%        0.7%

    Prescription volume (90 Day = 3 prescriptions) (4)                                                                                             (1.4)%        5.9%

    Generic dispensing rates                                                                                                                        87.5%       85.7%

    Pharmacy % of net revenues                                                                                                                      74.6%       74.7%

    ________________________

             (1)    Gross profit and operating expenses for the three
                     months ended March 31, 2016 includes $4 million and
                     $57 million, respectively, of acquisition-related
                     integration costs. The integration costs are related
                     to the acquisitions of Omnicare and the pharmacies
                     and clinics of Target.

             (2)    Operating expenses for the three months ended March
                     31, 2017 includes a $199 million charge associated
                     with store closures and $15 million of acquisition-
                     related integration costs. The integration costs are
                     related to the acquisition of Omnicare.

             (3)    Amounts revised for the three months ended March 31,
                     2016 to reflect the adoption of ASU 2017-07,
                     Improving the Presentation of Net Periodic Pension
                     Cost and Net Periodic Postretirement Benefit Cost,
                     which decreased operating expenses and increased
                     operating profit by $7 million.

             (4)    Includes the adjustment to convert 90-day, non-
                     specialty prescriptions to the equivalent of three
                     30-day prescriptions. This adjustment reflects the
                     fact that these prescriptions include approximately
                     three times the amount of product days supplied
                     compared to a normal prescription.

             (5)    Same store sales and prescriptions exclude revenues
                     from MinuteClinic, and revenue and prescriptions from
                     stores in Brazil, LTC operations and from
                     commercialization services.


                                                                                                                Adjusted Earnings Per Share Guidance

                                                                                                                            (Unaudited)


    The following reconciliation of estimated income before income tax provision to estimated adjusted earnings per share contains forward-looking information. All forward-looking information involves risks and uncertainties.
     Actual results may differ materially from those contemplated by the forward-looking information for a number of reasons as described in our Securities and Exchange Commission filings, including those set forth in the Risk
     Factors section and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q. See also previous
     discussion at "Non-GAAP Financial Measures" for more information on how we calculate Adjusted EPS.



                                                                                                                                                                        Year Ending

    In millions, except per share amounts                                                                                                                            December 31, 2017
    -------------------------------------                                                                                                                            -----------------


    Income before income tax provision                                                                                                                                                                  $8,563                     $8,806

    Non-GAAP adjustments:

    Amortization of intangible assets                                                                                                                                                                      820                        820

    Acquisition-related integration costs                                                                                                                                                                   40                         40

    Charge in connection with store rationalization                                                                                                                                                        220                        220

    Loss on settlement of defined benefit pension plan                                                                                                                                                     200                        200
                                                                                                                                                                                                           ---                        ---

    Adjusted income before income tax provision                                                                                                                                                          9,843                     10,086

    Adjusted income tax provision                                                                                                                                                                        3,862                      3,949
                                                                                                                                                                                                         -----                      -----

    Adjusted income from continuing operations                                                                                                                                                           5,981                      6,137

    Net income attributable to noncontrolling interest                                                                                                                                                     (2)                       (2)

    Adjusted income allocable to participating securities                                                                                                                                                 (25)                      (25)
                                                                                                                                                                                                           ---                        ---

    Adjusted income from continuing operations attributable to CVS Health                                                                                                                               $5,954                     $6,110
                                                                                                                                                                                                        ======                     ======


    Weighted average diluted shares outstanding                                                                                                                                                          1,031                      1,031

    Adjusted earnings per share                                                                                                                                                                          $5.77                      $5.93
                                                                                                                                                                                                         =====                      =====



                                                                                                                                                                    Three Months Ending

    In millions, except per share amounts                                                                                                                               June 30, 2017
    -------------------------------------                                                                                                                              -------------


    Income before income tax provision                                                                                                                                                                  $1,917                     $1,994

    Non-GAAP adjustments:

    Amortization of intangible assets                                                                                                                                                                      200                        200

    Acquisition-related integration costs                                                                                                                                                                   15                         15

    Charge in connection with store rationalization                                                                                                                                                         10                         10
                                                                                                                                                                                                           ---                        ---

    Adjusted income before income tax provision                                                                                                                                                          2,142                      2,219

    Adjusted income tax provision                                                                                                                                                                          812                        843
                                                                                                                                                                                                           ---                        ---

    Adjusted income from continuing operations                                                                                                                                                           1,330                      1,376

    Net income attributable to noncontrolling interest                                                                                                                                                       -                         -

    Adjusted income allocable to participating securities                                                                                                                                                  (5)                       (5)
                                                                                                                                                                                                           ---                        ---

    Adjusted income from continuing operations attributable to CVS Health                                                                                                                               $1,325                     $1,371
                                                                                                                                                                                                        ======                     ======


    Weighted average diluted shares outstanding                                                                                                                                                          1,029                      1,029

    Adjusted earnings per share                                                                                                                                                                          $1.29                      $1.33
                                                                                                                                                                                                         =====                      =====


                                                                                                Free Cash Flow Guidance

                                                                                                      (Unaudited)


    The following reconciliation of net cash provided by operating activities to free cash flow contains forward-looking information. All forward-looking information involves risks
     and uncertainties. Actual results may differ materially from those contemplated by the forward-looking information for a number of reasons as described in our Securities and
     Exchange Commission filings, including those set forth in the Risk Factors section and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in
     our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q. See also previous discussion at "Non-GAAP Financial Measures" for more information on how
     we calculate Free Cash Flow.



                                                                                                                               Year Ending

    In millions                                                                                                             December 31, 2017
    -----------                                                                                                             -----------------

    Net cash provided by operating activities                                                                                                                  $7,700                    $8,600

    Subtract: Additions to property and equipment                                                                                                             (2,000)                  (2,400)

    Add: Proceeds from sale-leaseback transactions                                                                                                                300                       200
                                                                                                                                                                  ---                       ---

    Free cash flow                                                                                                                                             $6,000                    $6,400
                                                                                                                                                               ======                    ======

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cvs-health-reports-first-quarter-results-confirms-2017-eps-guidance-300449201.html

SOURCE CVS Health Corporation


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