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CVS Caremark Reports Third Quarter Results
Date:11/6/2012

WOONSOCKET, R.I., Nov. 6, 2012 /PRNewswire/ -- CVS Caremark Corporation (NYSE: CVS) today announced operating results for the three months ended September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20090226/NE75914LOGO )

Third Quarter and Year-Over-Year Highlights:

  • Net revenues increased 13.3% to a record $30.2 billion, with Pharmacy Services up 22.2% and Retail Pharmacy up 5.5%
  • Retail Pharmacy same stores sales increased 4.3%
  • Income from continuing operations increased 16.7%
  • Adjusted EPS increased 21.4% to $0.85; GAAP diluted EPS from continuing operations of $0.79
  • Year-to-Date Highlights:

  • Free cash flow of $4.1 billion
  • Cash flow from operations of $4.9 billion
  • 2012 Guidance:

  • Full-year Adjusted EPS raised and narrowed to $3.38 to $3.41
  • Full-year GAAP diluted EPS from continuing operations raised and narrowed to $3.15 to $3.18
  • Confirmed full-year free cash flow guidance of $4.6 to $4.9 billion and cash flow from operations of $6.2 to $6.4 billion
  • RevenuesNet revenues for the three months ended September 30, 2012 increased 13.3%, or $3.6 billion, to $30.2 billion, up from $26.7 billion in the three months ended September 30, 2011.

    Revenues in the Pharmacy Services Segment increased 22.2% to $18.1 billion in the three months ended September 30, 2012. This increase was primarily driven by new client starts associated with our highly successful 2012 selling season, drug cost inflation, and the growth of our Medicare Part D program. Pharmacy network claims processed during the three months ended September 30, 2012 increased 10.0%, to 197.0 million, compared to 179.2 million in the prior year period. The increase in pharmacy network claims was primarily due to new client starts, as well as higher claims activity associated with our Medicare Part D program. Mail choice claims processed during the three months ended September 30, 2012 increased approximately 16.3% to 20.4 million compared to 17.5 million in the prior year period. The increase in the mail choice claim volume was primarily driven by new client starts and the continued adoption of our unique Maintenance Choice® program.

    Revenues in the Retail Pharmacy Segment increased 5.5% to $15.5 billion in the three months ended September 30, 2012. Same store sales increased 4.3% over the prior year period, with pharmacy same store sales increasing 5.3% over the prior year period. The increase in pharmacy same store sales included a significant benefit associated with Walgreens not being part of the Express Scripts pharmacy provider network for the majority of the quarter as well as strong underlying prescription growth. Pharmacy same store prescription volumes rose 8.7% when 90-day scripts are counted as one script. When converting 90-day scripts into three scripts, our same store prescription volumes increased 11.1% in the quarter. Pharmacy same store sales were negatively impacted by approximately 905 basis points due to recent generic introductions. Front store same store sales increased 2.2% in the three months ended September 30, 2012.

    For the three months ended September 30, 2012, the generic dispensing rate increased approximately 500 basis points to 79.3% in our Pharmacy Services Segment and 420 basis points to 79.9% in our Retail Pharmacy Segment, compared to the prior year period.

    Income from Continuing Operations Attributable to CVS CaremarkIncome from continuing operations attributable to CVS Caremark for the three months ended September 30, 2012 increased $143 million, to approximately $1.0 billion, compared with $868 million during the three months ended September 30, 2011 attributable to both our Retail Pharmacy and Pharmacy Services segments. Both segments benefited from the impact of increased generic drugs dispensed and the continued growth of our Maintenance Choice program. Our retail business benefited significantly from the contractual impasse between Walgreens and Express Scripts which ended effective September 15, 2012. Our pharmacy benefit management business benefited from the growth of our Medicare Part D business as well as 2012 new client starts. Adjusted earnings per share from continuing operations attributable to CVS Caremark ("Adjusted EPS") for the three months ended September 30, 2012 and 2011 were $0.85 and $0.70, respectively. Adjusted EPS excludes $121 million and $118 million of intangible asset amortization related to acquisition activity in the three months ended September 30, 2012 and 2011, respectively. GAAP earnings per diluted share from continuing operations attributable to CVS Caremark for the three months ended September 30, 2012 and 2011 were $0.79 and $0.65, respectively.

    Larry Merlo, president and CEO, stated, "I'm very pleased with our third quarter earnings, which exceeded the high end of our guidance range by two cents per share. We posted strong results across the enterprise, with the Pharmacy Services Segment significantly outpacing our growth expectations. The retail pharmacy business continued to capitalize on the market disruption resulting from the impasse between two of our competitors, and our retention of the prescriptions we gained during that impasse has been strong since their dispute was resolved in mid-September. Given what we have seen to date, we are optimistic that we will exceed our initial retention goal for the fourth quarter and now expect to retain at least 60% of the prescriptions gained during the impasse."

    Mr. Merlo added: "We continue to deliver substantial free cash flow and to return significant value to our shareholders. Between dividends and share repurchases, we have returned more than $4.8 billion to our shareholders year-to-date and we remain highly focused on enhancing shareholder returns."

    Real Estate ProgramDuring the three months ended September 30, 2012, the Company opened 45 new retail drugstores and closed three retail drugstores. In addition, the Company relocated 18 retail drugstores. As of September 30, 2012, the Company operated 7,500 locations, including 7,423 retail drugstores, 28 onsite pharmacies, 31 retail specialty pharmacy stores, 12 specialty mail order pharmacies and six mail order pharmacies in 44 states, the District of Columbia and Puerto Rico.

    GuidanceGiven the strong third-quarter performance, the anticipated benefit from the accelerated share repurchase program announced in September 2012, and the Company's optimism about retaining at least 60% of the prescriptions gained during the impasse between two of its competitors, the Company is raising and narrowing its guidance for the full year. The Company currently expects to achieve Adjusted EPS for 2012 in the range of $3.38 to $3.41, up from its previous range of $3.32 to $3.38, and GAAP diluted EPS from continuing operations in the range of $3.15 to $3.18, up from its previous range of $3.09 to $3.15. The Company reiterated its 2012 free cash flow guidance and expects to generate between $4.6 billion and $4.9 billion for the year. Further, the Company confirmed that it expects to generate cash flow from operations in 2012 in the range of $6.2 billion to $6.4 billion. These 2012 guidance estimates include the completion of the accelerated share repurchase agreement of $1.2 billion entered into on September 19, 2012.

    Teleconference and WebcastThe Company will be holding a conference call today for the investment community at 8:30 a.m. (EST) 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 Caremark website at http://info.cvscaremark.com/investors. This webcast will be archived and available on the website for a one-year period following the conference call.

    About the CompanyCVS Caremark is dedicated to helping people on their path to better health as the largest integrated pharmacy company in the United States. Through the Company's more than 7,400 CVS/pharmacy® stores; its leading pharmacy benefit manager serving more than 60 million plan members; and its retail health clinic system, the largest in the nation with approximately 600 MinuteClinic® locations, it is a market leader in mail order, retail and specialty pharmacy, retail clinics, and Medicare Part D Prescription Drug Plans. As a pharmacy innovation company with an unmatched breadth of capabilities, CVS Caremark continually strives to improve health and lower costs by developing new approaches such as its unique Pharmacy Advisor® program that helps people with chronic diseases such as diabetes obtain and stay on their medications. Find more information about how CVS Caremark is reinventing pharmacy for better health at http://info.cvscaremark.com/.

    Forward-Looking StatementsThis press release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2011 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q.
    – Tables Follow –

    CVS CAREMARK CORPORATION
    Condensed Consolidated Statements of Income
    (Unaudited)Three Months EndedNine Months EndedSeptember 30, September 30,In millions, except per share amounts

    2012(1)20112012(1) 2011Net revenues

    $  30,227$  26,674$   91,739$   78,783Cost of revenues

    24,58021,49675,53063,777Gross profit

    5,6475,17816,20915,006Operating expenses

    3,8333,59411,28410,633Operating profit

    1,8141,5844,9254,373Interest expense, net

    134155397437Income before income tax provision

    1,6801,4294,5283,936Income tax provision

    6695621,7751,547Income from continuing operations

    1,0118672,7532,389Income (loss) from discontinued operations, net of tax

    (5)—(7)5Net income

    1,0068672,7462,394Net loss attributable to noncontrolling interest

    —123Net income attributable to CVS Caremark

    $   1,006$
    868$
    2,748$
    2,397Income from continuing operations attributable to CVS  Caremark:Income from continuing operations

    $
    ,011$
    867$
    2,753$
    2,389Net loss attributable to noncontrolling interest

    —123Income from continuing operations attributable to CVS Caremark

    $
    ,011$
    868$
    2,755$
    2,392Basic earnings per common share:

      Income from continuing operations attributable to CVS Caremark

     

    $
    .80 

    $
    .65$
    2.15 

    $
    .77Income (loss) from discontinued operations attributable to CVS Caremark

    ——(0.01)0.01Net income attributable to CVS Caremark

    $
    .80$
    .65$
    2.15$
    .78Weighted average basic common shares outstanding

    1,2651,3321,2811,350Diluted earnings per common share:

    Income from continuing operations attributable to CVS Caremark

     

    $
    .79 

    $
    .65 

    $
    2.14 

    $
    .76Income (loss) from discontinued operations attributable to CVS Caremark

    ——(0.01)0.01Net income attributable to CVS Caremark

    $
    .79$
    .65$
    2.13$
    .77Weighted average diluted common shares outstanding

    1,2741,3401,2901,356Dividends declared per common share$0.1625$  0.1250$0.4875$  0.3750(1)
    Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment. Additional details of this accounting change are discussed in Note 2 to the condensed consolidated financial statements included in the Company's Form 10-Q for the quarter ended September 30, 2012.

    CVS CAREMARK CORPORATION
    Condensed Consolidated Balance Sheets
    (Unaudited) 

    In millions, except per share amounts

    September 30,

    2012(1)December 31,

    2011Assets:Cash and cash equivalents

    $
    ,233$
    ,413Short-term investments

    55Accounts receivable, net

    6,4076,047Inventories

    10,48710,046Deferred income taxes

    535503Other current assets

    212580Total current assets

    18,87918,594Property and equipment, net

    8,3698,467Goodwill

    26,42226,458Intangible assets, net

    9,8019,869Other assets

    1,3251,155Total assets

    $
    4,796$
    4,543Liabilities:Accounts payable

    $
    5,091$
    4,370Claims and discounts payable

    3,7243,487Accrued expenses

    3,6183,293Short-term debt

    825750Current portion of long-term debt

    556Total current liabilities

    13,26311,956Long-term debt

    9,2109,208Deferred income taxes

    3,8943,853Other long-term liabilities

    1,5131,445Commitments and contingenciesRedeemable noncontrolling interest

    —30Shareholders' equity:Preferred stock, par value $0.01: 0.1 share authorized; none issued or outstanding

    ——Common stock, par value $0.01: 3,200 shares authorized; 1,662 shares issued and 1,246 shares outstanding at September 30, 2012 and ,640 shares issued and 1,298 shares outstanding at December 31, 2011

    1716Treasury stock, at cost: 415 shares at September 30, 2012 and 340 shares at December 31, 2011

    (15,937)(11,953)Shares held in trust: 1 share at September 30, 2012and 2 shares at December 31, 2011

    (31)(56)Capital surplus

    28,91428,126Retained earnings

    24,12322,090Accumulated other comprehensive loss

    (170)(172)Total shareholders' equity

    36,91638,051Total liabilities and shareholders' equity

    $
    4,796$
    4,543(1)
    Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment. Additional details of this accounting change are discussed in Note 2 to the condensed consolidated financial statements included in the Company's Form 10-Q for the quarter ended September 30, 2012.

    CVS CAREMARK CORPORATION
    Condensed Consolidated Statements of Cash Flows
    (Unaudited)Nine Months EndedSeptember 30, In millions

    2012(1)2011Cash flows from operating activities:Cash receipts from customers

    $
    84,463$
    72,875Cash paid for inventory and prescriptions dispensed by retail network pharmacies

    (67,464)(55,625)Cash paid to other suppliers and employees

    (10,120)(10,092)Interest received

    23Interest paid

    (411)(454)Income taxes paid

    (1,530)(1,672)Net cash provided by operating activities

    4,9405,035Cash flows from investing activities:Purchases of property and equipment

    (1,314)(1,168)Proceeds from sale-leaseback transactions

    42711Proceeds from sale of property and equipment

    —1Acquisitions (net of cash acquired) and other investments

    (303)(1,406)Purchase of available-for-sale investments

    —(3)Maturity of available-for-sale investments

    —2Proceeds from sale of subsidiary

    7—Net cash used in investing activities

    (1,183)(2,563)Cash flows from financing activities:Increase in short-term debt

    75230Proceeds from issuance of long-term debt

    —1,463Repayments of long-term debt

    (56)(1,149)Purchase of noncontrolling interest in subsidiary

    (26)—Dividends paid

    (627)(508)Derivative settlements

    —(19)Proceeds from exercise of stock options

    677341Excess tax benefits from stock-based compensation

    2112Repurchase of common stock

    (4,001)(2,553)Other

    —(9)Net cash used in financing activities

    (3,937)(2,192)Net increase (decrease) in cash and cash equivalents

    (180)280Cash and cash equivalents at beginning of period

    1,4131,427Cash and cash equivalents at end of period

    $
    ,233$
    ,707 

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

    $
    2,746$
    2,394Adjustments required to reconcile net income to net cash provided by operating activities:Depreciation and amortization

    1,2971,172Stock-based compensation

    97100Deferred income taxes and other noncash items

    87134Change in operating assets and liabilities, net of effects from acquisitions:Accounts receivable, net

    (296)(479)Inventories

    (586)316Other current assets

    425(173)Other assets

    (142)(52)Accounts payable and claims and discounts payable

    919716Accrued expenses

    325980Other long-term liabilities

    68(73)Net cash provided by operating activities

    $
    4,940$
    5,035(1)
    Effective January 1, 2012, the Company changed its methods of accounting for prescription drug inventories in the Retail Pharmacy Segment. Additional details of this accounting change are discussed in Note 2 to the condensed consolidated financial statements included in the Company's Form 10-Q for the quarter ended September 30, 2012.

    Adjusted Earnings Per Share
    (Unaudited)For internal comparisons, management finds it useful to assess year-to-year performance by adjusting diluted earnings per share for amortization, which primarily relates to acquisition activities.

    The Company defines adjusted earnings per share as income before income tax provision plus amortization, less adjusted income tax provision, plus net loss attributable to noncontrolling interest divided by the weighted average diluted common shares outstanding.

    The following is a reconciliation of income before income tax provision to adjusted earnings per share:Three Months EndedNine Months EndedSeptember 30, September 30,In millions, except per share amounts

    2012201120122011Income before income tax provision

    $
    ,680$
    ,429$
    4,528$
    3,936Amortization

    121118362338Adjusted income before income tax provision

    1,8011,5474,8904,274Adjusted income tax provision(1)

    7176081,9161,679Adjusted income from continuing operations

    1,0849392,9742,595Net loss attributable to noncontrolling interest

    —123Adjusted income from continuing operations attributable to CVS Caremark

    $
    ,084$
    940$
    2,976$
    2,598Weighted average diluted common shares outstanding

    1,2741,3401,2901,356Adjusted earnings per share from continuing operations attributable to CVS Caremark

    $
    .85$
    .70$
    2.31$
    .91(1)
    The adjusted income tax provision is computed using the effective income tax rate from the consolidated statement of income.

    Free Cash Flow
    (Unaudited)The Company defines free cash flow as net cash provided by operating activities less net additions to properties and equipment (i.e., additions to property and equipment plus proceeds from sale-leaseback transactions).

    The following is a reconciliation of net cash provided by operating activities to free cash flow:Nine Months EndedSeptember 30,In millions20122011Net cash provided by operating activities$
    4,940$
    5,035  Subtract: Additions to property and equipment(1,314)(1,168)  Add: Proceeds from sale-leaseback transactions42711Free cash flow $
    4,053$
    3,878Supplemental Information
    (Unaudited)The Company evaluates its Pharmacy Services and Retail Pharmacy segment performance based on net revenue, 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:

     

    In millions

    Pharmacy

    Services

    Segment(1)Retail

    Pharmacy

    SegmentCorporate

    SegmentIntersegment

    Eliminations(2)Consolidated

    TotalsThree Months Ended  September 30, 2012:Net revenues

     

    $
    8,079 

    $
    5,504 

    $
    -- 

    $
    (3,356) 

    $
    30,227Gross profit

    1,0814,672--(106)5,647Operating profit (loss)

    7841,305(169)(106)1,814  September 30, 2011:Net revenues

     

    14,798 

    14,693 

    -- 

    (2,817) 

    26,674Gross profit

    9144,306--(42)5,178Operating profit (loss)

    6571,123(154)(42)1,584Nine Months Ended  September 30, 2012:Net revenues

     

    54,802 

    47,373 

    -- 

    (10,436) 

    91,739Gross profit

    2,47414,014--(279)16,209Operating profit (loss)

    1,6444,071(511)(279)4,925  September 30, 2011:Net revenues

     

    43,000 

    44,106 

    -- 

    (8,323) 

    78,783Gross profit

    2,26312,860--(117)15,006Operating profit (loss)

    1,4963,459(465)(117)4,373Total assets:  September 30, 2012

    35,56528,6141,282(665)64,796  December 31, 2011

    35,70428,3231,121(605)64,543Goodwill:  September 30, 2012

    19,6216,801----26,422  December 31, 2011

    19,6576,801----26,458(1)
    Net revenues of the Pharmacy Services Segment include approximately $2.0 billion and $1.9 billion of retail co-payments for the three months ended September 30, 2012 and 2011, respectively, as well as $6.4 billion and $6.0 billion of retail co-payments for the nine months ended September 30, 2012 and 2011, respectively.

    (2)
    Intersegment eliminations relate to two types of transactions: (i) Intersegment revenues that occur when Pharmacy Services Segment customers use Retail Pharmacy Segment stores to purchase covered products. When this occurs, both the Pharmacy Services and Retail Pharmacy segments record the revenue on a standalone basis, and (ii) Intersegment revenues, gross profit and operating profit that occur when Pharmacy Services Segment customers, through the Company's intersegment activities (such as the Maintenance Choice program), elect to pick-up their maintenance prescriptions at Retail Pharmacy Segment stores instead of receiving them through the mail. When this occurs, both the Pharmacy Services and Retail Pharmacy segments record the revenue, gross profit and operating profit on a standalone basis. Beginning in the fourth quarter of 2011, the Maintenance Choice eliminations reflect all discounts available for the purchase of mail order prescription drugs. The following amounts are eliminated in consolidation in connection with the item (ii) intersegment activity: net revenues of $841 million and $657 million for the three months ended September 30, 2012 and 2011, respectively, and $2.5 billion and $1.8 billion for the nine months ended September 30, 2012 and 2011, respectively; gross profit and operating profit of $106 million and $42 million for the three months ended September 30, 2012 and 2011, respectively, and $279 million and $117 million for the nine months ended September 30, 2012 and 2011, respectively.

    Supplemental Information
    (Unaudited)
    Pharmacy Services SegmentThe following table summarizes the Pharmacy Services Segment's performance for the respective periods:Three Months EndedNine Months EndedSeptember 30,September 30,In millions

    2012201120122011Net revenues

    $18,079$ 14,798$ 54,802$   43,000Gross profit

    1,0819142,4742,263Gross profit % of net revenues

    6.0%6.2%4.5%5.3%Operating expenses

    297257830767Operating expense % of net revenues

    1.6%1.7%1.5%1.8%Operating profit

    7846571,6441,496Operating profit % of net revenues

    4.3%4.4%3.0%3.5%Net revenues(1): Mail choice(2)

    $ 5,675$
    4,741$ 17,084$
    3,715Pharmacy network(3)

    12,36310,00337,57329,116Other

    4154145169Pharmacy claims processed(1):Total

    217.4196.7654.6563.7Mail choice(2)

    20.417.561.352.8Pharmacy network(3)

    197.0179.2593.3510.9Generic dispensing rate(1):Total

    79.3%74.3%78.0%74.0%Mail choice(2)

    73.1%65.0%71.1%64.4%Pharmacy network(3)

    79.9%75.3%78.6%75.0%Mail choice penetration rate

    22.9%21.8%22.9%22.8%(1)
    Pharmacy network net revenues, claims processed and generic dispensing rates do not include Maintenance Choice, which are included within the mail choice category.

    (2)
    Mail choice is defined as claims filled at a Pharmacy Services' mail facility, which includes specialty mail claims, as well as 90-day claims filled at retail under the Maintenance Choice program.

    (3)
    Pharmacy network is defined as claims filled at retail pharmacies, including our retail drugstores.EBITDA and EBITDA per Adjusted Claim
    (Unaudited)The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. We define EBITDA per adjusted claim as EBITDA divided by adjusted pharmacy claims. Adjusted pharmacy claims normalize the claims volume statistic for the difference in average days' supply for mail and retail claims. Adjusted pharmacy claims are calculated by multiplying 90-day claims (the majority of total mail claims) by 3 and adding the 30-day claims. EBITDA can be reconciled to operating profit, which we believe to be the most directly comparable GAAP financial measure.

    The following is a reconciliation of operating profit to EBITDA for the Pharmacy Services Segment:Three Months EndedNine Months EndedSeptember 30,September 30,In millions, except per adjusted claim amounts

    2012201120122011Operating profit

    $
    784$
    57$
    ,644$
    ,496Depreciation and amortization

    130112380317EBITDA

    9147692,0241,813Adjusted claims

    255.4229.2769.1661.7EBITDA per adjusted claim

    $   3.58$   3.35$
    2.63$
    2.74Supplemental Information
    (Unaudited)Retail Pharmacy SegmentThe following table summarizes the Retail Pharmacy Segment's performance for the respective periods:Three Months EndedNine Months EndedSeptember 30,September 30,In millions

    2012201120122011Net revenues

    $15,504$14,693$47,373$44,106Gross profit

    4,6724,30614,01412,860Gross profit % of net revenues

    30.1%29.3%29.6%29.2%Operating expenses

    3,3673,1839,9439,401Operating expense % of net revenues

    21.7%21.7%21.0%21.3%Operating profit

    1,3051,1234,0713,459Operating profit % of net revenues

    8.4%7.6%8.6%7.8%Retail prescriptions filled (90 Day = 1Rx)

    176.5161.0532.4488.9Retail prescriptions filled (90 Day = 3 Rx) (1)

    209.8187.5628.3565.5Net revenue increase:Total

    5.5%3.8%7.4%3.9%Pharmacy

    6.3%3.6%8.6%4.2%Front store

    3.7%4.2%4.9%3.3%Total prescription volume (90 Day = 1 Rx)

    9.6%2.1%8.9%3.5%Total prescription volume (90 Day = 3 Rx) (1)

    11.8%4.3%11.0%5.6%Same store increase: Total sales

    4.3%2.3%6.1%2.3%Pharmacy sales

    5.3%2.4%7.4%2.8%Front store sales

    2.2%2.0%3.2%1.1%Prescription volume (90 Day = 1 Rx)

    8.7%1.0%7.8%2.3%Prescription volume (90 Day = 3 Rx) (1)

    11.1%3.1%10.0%4.4%Generic dispensing rate

    79.9%75.7%79.0%75.5%Pharmacy % of total revenues

    69.1%68.5%69.3%68.5%Third party % of pharmacy revenue

    97.6%97.9%98.0%97.8%(1)
    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.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 that is subject to risks and uncertainties that could cause actual results to differ materially. The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2011 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q. For internal comparisons, management finds it useful to assess year-to-year performance by adjusting diluted earnings per share for amortization, which primarily relates to acquisition activities.

     Year EndingIn millions, except per share amounts

    December 31, 2012Income before income tax provision

    $
    ,626$
    ,683Amortization

    482482Adjusted income before income tax provision

    7,1087,165Adjusted income tax provision

    2,7722,794Adjusted income from continuing operations

    4,3364,371Net loss attributable to noncontrolling interest

    22Adjusted income from continuing operations attributable to CVS Caremark

    $
    4,338$
    4,373Weighted average diluted common shares outstanding

    1,2831,283Adjusted earnings per share from continuing operations attributable to CVS Caremark

    $
    3.38$
    3.41Free Cash Flow Guidance
    (Unaudited)The following reconciliation of net cash provided by operating activities to free cash flow contains forward-looking information that is subject to risks and uncertainties that could cause actual results to differ materially. The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2011 and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Quarterly Report on Form 10-Q. For internal comparisons, management finds it useful to assess year-to-year cash flow performance by adjusting cash provided by operating activities, by capital expenditures and proceeds from sale-leaseback transactions.

     Year EndingIn millions

    December 31, 2012 Net cash provided by operating activities

    $
    ,249$
    ,423Subtract:  Additions to property and equipment

    (2,100)(2,025)Add:  Proceeds from sale-leaseback transactions

    500550Free cash flow

    $
    4,649$
    4,948 


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    SOURCE CVS Caremark Corporation
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    3. CVS Caremark Corporation Announces New Share Repurchase Authorization for up to $6 Billion of Common Stock
    4. CVS Caremark to Present at Morgan Stanley Global Healthcare Conference
    5. CVS Caremark To Present At Goldman Sachs 2012 Global Retailing Conference
    6. CVS Caremark Charitable Trust Partners with National Association of Community Health Centers to Create Innovative Grant Program Focused on Managing Chronic Disease
    7. CVS Caremark Research Identifies Positive Link Between Medication Adherence and Employee Productivity
    8. CVS Caremark Sponsored Research Finds FDA Drug Warnings Can Have Immediate Negative Impact on Medication Adherence, Even if Not Related to Safety
    9. CVS Caremark Reports Record First Quarter Results
    10. CVS Caremark Corporation to Hold First Quarter 2012 Conference Call
    11. Lexicon Pharmaceuticals Reports on Clinical Program Status and 2012 Third Quarter Results
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