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HomeAll newsMost read newsBusiness Leaders Biography 
Birthday : 08/11/1957
Place of birth : Tosu - Japan
Biography : Mr. Masayoshi Son is Chairman at Sprint Corp., Chairman at SoftBank Corp., President & Representativ
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CVS Health : Reports Strong Fourth Quarter And Full Year Profit Growth For 2015; Confirms 2016 Guidance

02/09/2016 | 06:52am US/Eastern

WOONSOCKET, R.I., Feb. 9, 2016 /PRNewswire/ --

Fourth Quarter Year-over-year Highlights:

    --  Net revenues increased 11.0% to a record $41.1 billion
    --  Operating profit increased 17.6% to $2.7 billion
    --  GAAP diluted EPS from continuing operations of $1.34
    --  Adjusted EPS of $1.53, an increase of 26.5%, excluding certain items
        (amortization, transaction and integration costs, and a $90 million
        charge related to a disputed 1999 legal settlement)

Full Year Highlights:

    --  Net revenues increased 10.0% to a record $153.3 billion
    --  Operating profit increased 7.4% to $9.5 billion
    --  GAAP diluted EPS from continuing operations of $4.62
    --  Adjusted EPS of $5.16, an increase of 14.8%, excluding certain items
        (amortization, bridge financing costs, transaction and integration
        costs, a $90 million charge related to a disputed 1999 legal settlement,
        and the 2014 loss on early extinguishment of debt)
    --  Generated free cash flow of $6.5 billion; cash flow from operations of
        $8.4 billion

2016 Guidance:

    --  Confirmed full year Adjusted EPS of $5.73 to $5.88 excluding
        amortization; GAAP diluted EPS from continuing operations of $5.28 to
        $5.43; both exclude acquisition-related integration costs
    --  Confirmed first quarter Adjusted EPS of $1.14 to $1.17 excluding
        amortization; GAAP diluted EPS from continuing operations of $1.03 to
        $1.06; both exclude acquisition-related integration costs
    --  Confirmed full year free cash flow of $5.3 to $5.6 billion and cash flow
        from operations of $7.6 to $7.9 billion

CVS Health Corporation (NYSE: CVS) today announced operating results for the three months and year ended December 31, 2015.

Revenues

Net revenues for the three months ended December 31, 2015 increased 11.0%, or $4.1 billion to $41.1 billion, up from $37.1 billion in the three months ended December 31, 2014. For the year ended December 31, 2015, total net revenues increased 10.0%, or $13.9 billion to $153.3 billion, compared to $139.4 billion for the year ended December 31, 2014.

Revenues in the Pharmacy Services Segment increased 11.1% to $26.5 billion in the three months ended December 31, 2015. This increase was primarily driven by growth in specialty pharmacy, which includes the impact of the Omnicare, Inc. ("Omnicare") acquisition in August 2015, and pharmacy network claims. Pharmacy network claims processed during the three months ended December 31, 2015, increased 7.2% to 237.4 million, compared to 221.6 million in the prior year period. The increase in pharmacy network claim volume was primarily due to net new business. Mail choice claims processed during the three months ended December 31, 2015 increased approximately 3.9% to 22.2 million, compared to 21.3 million in the prior year period. The increase in the mail choice claim volume was primarily driven by specialty and continued adoption of our Maintenance Choice(®) offerings, partially offset by a decline in traditional mail volume. For the year ended December 31, 2015, total net revenues in the Pharmacy Services Segment increased 13.5% to $100.4 billion, compared to $88.4 billion in the year ended December 31, 2014.

Revenues in the Retail/LTC Segment increased 12.5% to $19.9 billion in the three months ended December 31, 2015. Approximately half of the increase was driven by the addition of long-term care ("LTC") operations acquired as part of the Omnicare acquisition. Same store sales increased 3.5% over the prior year period, with pharmacy same store sales up 5.0% and front store same store sales down 0.5%. Front store same store sales were negatively impacted by softer customer traffic, partially offset by an increase in basket size. Pharmacy same store prescription volumes rose 5.0% on a 30-day equivalent basis. Pharmacy same store sales were negatively impacted by approximately 470 basis points due to recent generic introductions. For the year ended December 31, 2015, total net revenues in the Retail/LTC Segment increased 6.2% to $72.0 billion, compared to $67.8 billion in the year ended December 31, 2014. Same store sales increased 1.7% for the year ended December 31, 2015, over the prior year, with pharmacy same store sales up 4.5% and front store same store sales down 5.0%. Front store same store sales would have been approximately 520 basis points higher if tobacco and the estimated associated basket sales were excluded from the year ended December 31, 2014.

For the three months ended December 31, 2015, the generic dispensing rate increased approximately 165 basis points to 83.7% in our Pharmacy Services Segment and increased approximately 155 basis points to 84.0% in our Retail/LTC Segment, compared to the prior year.

Operating Profit and Income from Continuing Operations

For the three months ended December 31, 2015, operating profit increased $243 million in the Pharmacy Services Segment and $299 million in the Retail/LTC Segment. The Pharmacy Services Segment operating profit grew 26.8% and the Retail/LTC Segment operating profit grew 19.8%((1)), excluding acquisition-related integration costs of $52 million. Both segments benefited from the Omnicare acquisition, increased generic drugs dispensing rates and favorable purchasing economics. The Pharmacy Services Segment was also positively affected by growth in specialty pharmacy and pharmacy network volume, partially offset by client price compression. The Retail/LTC Segment was also positively affected by increased sales, an improved front store margin rate, partially offset by continued reimbursement pressure. The Corporate Segment includes $20 million of acquisition-related transaction and integration costs for the three months ended December 31, 2015, related to the acquisition of Omnicare and the acquisition of the pharmacies and clinics of Target Corporation ("Target"), as well as a $90 million charge related to a legacy lawsuit challenging the 1999 settlement by MedPartners of various securities class actions and a related derivative claim.

For the year ended December 31, 2015, operating profit increased by $475 million in the Pharmacy Services Segment and by $368 million in the Retail/LTC Segment. The Pharmacy Services Segment grew 13.5% and the Retail/LTC Segment grew 6.4%((1)), excluding acquisition-related integration costs of $64 million. The drivers of the increases are the same as those described for the three months ended December 31, 2015 above. The Corporate Segment includes $156 million of acquisition-related transaction and integration costs for the year ended December 31, 2015 related to the acquisition of Omnicare and the acquisition of the pharmacies and clinics of Target, as well as the $90 million legal charge.

Income from continuing operations for the three months ended December 31, 2015 was $1.5 billion, an increase of $178 million or 13.4%, compared to the prior year. Income from continuing operations for the year ended December 31, 2015 was $5.2 billion, an increase of $585 million or 12.6%, compared to the prior year.

Adjusted earnings per share ("Adjusted EPS") for the three months ended December 31, 2015 and 2014, was $1.53 and $1.21, respectively, an increase of 26.5%. Adjusted EPS excludes $191 million and $128 million of intangible asset amortization for the three months ended December 31, 2015 and 2014, respectively. Adjusted EPS also excludes $72 million of acquisition-related transaction and integration costs and the $90 million legal charge. GAAP earnings per diluted share ("GAAP EPS") for the three months ended December 31, 2015 was $1.34, compared to $1.14 in the prior year.

Adjusted EPS for the years ended December 31, 2015 and 2014, was $5.16 and $4.49, respectively, an increase of 14.8%. Adjusted EPS excludes $611 million and $518 million of intangible asset amortization for the years ended December 31, 2015 and 2014, respectively. Adjusted EPS in 2015 also excludes $272 million of acquisition-related bridge financing, transaction and integration costs and the $90 million legal charge, and in 2014 excludes the loss on early extinguishment of debt. GAAP EPS for the year ended December 31, 2015 was $4.62, compared to $3.96 in the prior year.

President and CEO Larry Merlo, stated, "We enjoyed a successful year in 2015, highlighted by excellent performance across our enterprise and two key acquisitions that support our strategy for growth. We grew our core business with the acquisition of Target's pharmacies and clinics and expanded our reach with the acquisition of Omnicare, the leader in long-term care pharmacy. At the same time, we achieved solid year-over-year growth in revenues, operating profit, and earnings per share. We also generated $6.4 billion in free cash flow for the full-year, exceeding our expectations. Through dividends and share repurchases, we returned more than $6 billion to our shareholders in 2015. As expected, growth in the fourth quarter was especially strong, with revenues increasing 11% and Adjusted EPS increasing 26.5%, right in line with our guidance."

Mr. Merlo continued, "We continue to win and gain share across our businesses and I'm very pleased with the outstanding PBM selling season we had for 2016, with gross client wins of $14.8 billion. Our growth in the fast-growing specialty market continues to outpace the industry. Overall, our leadership in multiple competencies enables us to provide superior value for patients, payors, and providers. We firmly believe that we have the right strategy for success in the evolving health care marketplace."

Guidance

The Company confirmed its previous guidance for the full year and first quarter of 2016. The Company expects to deliver Adjusted EPS of $5.73 to $5.88 and GAAP diluted earnings per share from continuing operations of $5.28 to $5.43 in 2016. The Company also confirmed its first quarter Adjusted EPS guidance of $1.14 to $1.17 and GAAP diluted earnings per share from continuing operations of $1.03 to $1.06. Adjusted EPS excludes intangible asset amortization and guidance also excludes the affect of acquisition-related integration costs that are expected to occur during 2016. The Company confirmed its 2016 free cash flow guidance of $5.3 to $5.6 billion, and its 2015 cash flow from operations guidance of $7.6 to $7.9 billion. These 2016 guidance estimates assume the completion of $4.0 billion in share repurchases.

Real Estate Program

During the three months ended December 31, 2015, the Company opened 53 new retail stores, acquired 1,672 pharmacies and closed 14 retail stores. In addition, the Company relocated 19 retail stores. As of December 31, 2015, the Company operated 9,655 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.

Teleconference and Webcast

The Company will be holding a conference call today for the investment community at 8:30 am (EST) to discuss its quarterly and annual 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 CVS Health

CVS Health is a pharmacy innovation company helping people on their path to better health. Through its approximately 9,600 retail pharmacies, more than 1,100 walk-in medical clinics, a leading pharmacy benefits manager with more than 75 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year, and expanding specialty pharmacy services, 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.


    (1)              Excluding $52 million of
                     acquisition-related
                     integration costs, operating
                     profit for the Retail/LTC
                     Segment increased $351
                     million, or 19.8%, from
                     $1,780 million for the three
                     months ended December 31,
                     2014 to $2,131 million for
                     the three months ended
                     December 31, 2015. Excluding
                     $64 million of acquisition-
                     related integration costs,
                     operating profit for the
                     Retail/LTC Segment
                     increased $432 million, or
                     6.4%, from $6,762 million
                     for the year ended December
                     31, 2014 to $7,194 million
                     for the year ended December
                     31, 2015.


                                                                                - Tables Follow -


                                                                              CVS HEALTH CORPORATION

                                                                   Condensed Consolidated Statements of Income

                                                                                   (Unaudited)


                                                                                           Three Months Ended                 Year Ended

                                                                                              December 31,                   December 31,
                                                                                              ------------                   ------------

    In millions, except per share amounts                                                  2015                2014        2015               2014
    -------------------------------------                                                  ----                ----        ----               ----

    Net revenues                                                                                   $41,145                        $37,055          $153,290    $139,367

    Cost of revenues                                                                     33,844                     30,422                126,762    114,000
                                                                                         ------                     ------                -------    -------

    Gross profit                                                                          7,301                      6,633                 26,528     25,367

    Operating expenses                                                                    4,572                      4,312                 17,074     16,568
                                                                                          -----                      -----                 ------     ------

    Operating profit                                                                      2,729                      2,321                  9,454      8,799

    Interest expense, net                                                                   276                        131                    838        600

    Loss on early extinguishment of debt                                                      -                         -                     -       521
                                                                                            ---                       ---                   ---       ---

    Income before income tax provision                                                    2,453                      2,190                  8,616      7,678

    Income tax provision                                                                    953                        868                  3,386      3,033
                                                                                            ---                        ---                  -----      -----

    Income from continuing operations                                                     1,500                      1,322                  5,230      4,645

    Income (loss) from discontinued operations, net of tax                                  (1)                       (1)                     9        (1)
                                                                                            ---                        ---                    ---        ---

    Net income                                                                            1,499                      1,321                  5,239      4,644

    Net income attributable to noncontrolling interest                                      (1)                         -                   (2)         -
                                                                                                                                            ---        ---

    Net income attributable to CVS Health                                                           $1,498                         $1,321            $5,237      $4,644
                                                                                                    ======                         ======            ======      ======


    Income from continuing operations attributable to CVS Health:

    Income from continuing operations                                                               $1,500                         $1,322            $5,230      $4,645

    Net income attributable to noncontrolling interest                                      (1)                         -                   (2)         -
                                                                                            ---                        ---                   ---        ---

    Income from continuing operations attributable to CVS Health                                    $1,499                         $1,322            $5,228      $4,645
                                                                                                    ======                         ======            ======      ======

    Basic earnings per share:

    Income from continuing operations attributable to CVS Health                                     $1.35                          $1.15             $4.65       $3.98

    Income from discontinued operations attributable to CVS Health                            $          -                  $          -            $0.01    $      -

    Net income attributable to CVS Health                                                            $1.35                          $1.15             $4.66       $3.98

    Weighted average basic shares outstanding                                             1,107                      1,143                  1,118      1,161


    Diluted earnings per share:

    Income from continuing operations attributable to CVS Health                                     $1.34                          $1.14             $4.62       $3.96

    Income from discontinued operations attributable to CVS Health                            $          -                  $          -            $0.01    $      -

    Net income attributable to CVS Health                                                            $1.34                          $1.14             $4.63       $3.96

    Weighted average diluted shares outstanding                                           1,114                      1,152                  1,126      1,169

    Dividends declared per share                                                                     $0.35                         $0.275             $1.40       $1.10


                                                                                                CVS HEALTH CORPORATION

                                                                                        Condensed Consolidated Balance Sheets

                                                                                                     (Unaudited)


                                                                                                                                       December 31,
                                                                                                                                       ------------

    In millions, except per share amounts                                                                                         2015              2014
    -------------------------------------                                                                                         ----              ----

    Assets:

    Cash and cash equivalents                                                                                                              $2,459                   $2,481

    Short-term investments                                                                                                          88                          34

    Accounts receivable, net                                                                                                    11,888                       9,687

    Inventories                                                                                                                 14,001                      11,930

    Deferred income taxes                                                                                                        1,220                         985

    Other current assets                                                                                                           722                         866
                                                                                                                                   ---                         ---

    Total current assets                                                                                                        30,378                      25,983

    Property and equipment, net                                                                                                  9,855                       8,843

    Goodwill                                                                                                                    38,106                      28,142

    Intangible assets, net                                                                                                      13,878                       9,774

    Other assets                                                                                                                 1,440                       1,445
                                                                                                                                 -----                       -----

    Total assets                                                                                                                          $93,657                  $74,187
                                                                                                                                          =======                  =======


    Liabilities:

    Accounts payable                                                                                                                       $7,490                   $6,547

    Claims and discounts payable                                                                                                 7,653                       5,404

    Accrued expenses                                                                                                             6,829                       5,816

    Short-term debt                                                                                                                  -                        685

    Current portion of long-term debt                                                                                            1,197                         575
                                                                                                                                 -----                         ---

    Total current liabilities                                                                                                   23,169                      19,027

    Long-term debt                                                                                                              26,267                      11,630

    Deferred income taxes                                                                                                        5,437                       4,036

    Other long-term liabilities                                                                                                  1,542                       1,531

    Commitments and contingencies                                                                                                    -                          -

    Redeemable noncontrolling interest                                                                                              39                           -

    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; 1,699 shares issued and

    1,101 shares outstanding at December 31, 2015 and 1,691 shares issued and 1,140

    shares outstanding at December 31, 2014                                                                                         17                          17

    Treasury stock, at cost: 597 shares at December 31, 2015 and 550 shares

    at December 31, 2014                                                                                                      (28,886)                   (24,078)

    Shares held in trust: 1 share at December 31, 2015 and 2014                                                                   (31)                       (31)

    Capital surplus                                                                                                             30,948                      30,418

    Retained earnings                                                                                                           35,506                      31,849

    Accumulated other comprehensive income (loss)                                                                                (358)                      (217)
                                                                                                                                  ----                        ----

    Total CVS Health shareholders' equity                                                                                       37,196                      37,958

    Noncontrolling interest                                                                                                          7                           5
                                                                                                                                   ---                         ---

    Total shareholders' equity                                                                                                  37,203                      37,963

    Total liabilities and shareholders' equity                                                                                            $93,657                  $74,187
                                                                                                                                          =======                  =======


                                                                                                           CVS HEALTH CORPORATION

                                                                                               Condensed Consolidated Statements of Cash Flows

                                                                                                                 (Unaudited)


                                                                                                                                                             Year Ended

                                                                                                                                                            December 31,
                                                                                                                                                          ------------

    In millions                                                                                                                                     2015                 2014
    -----------                                                                                                                                     ----                 ----

    Cash flows from operating activities:

    Cash receipts from customers                                                                                                                         $148,954                        $132,406

    Cash paid for inventory and prescriptions dispensed by retail network pharmacies                                                           (122,498)                      (105,362)

    Cash paid to other suppliers and employees                                                                                                  (14,162)                       (15,344)

    Interest received                                                                                                                                 21                              15

    Interest paid                                                                                                                                  (629)                          (647)

    Income taxes paid                                                                                                                            (3,274)                        (2,931)
                                                                                                                                                  ------                          ------

    Net cash provided by operating activities                                                                                                      8,412                           8,137
                                                                                                                                                   -----                           -----

    Cash flows from investing activities:

    Purchases of property and equipment                                                                                                          (2,367)                        (2,136)

    Proceeds from sale-leaseback transactions                                                                                                        411                             515

    Proceeds from sale of property and equipment and other assets                                                                                     35                              11

    Acquisitions (net of cash acquired) and other investments                                                                                   (11,475)                        (2,439)

    Purchase of available-for-sale investments                                                                                                     (267)                          (157)

    Maturity of available-for-sale investments                                                                                                       243                             161
                                                                                                                                                     ---                             ---

    Net cash used in investing activities                                                                                                       (13,420)                        (4,045)
                                                                                                                                                 -------                          ------

    Cash flows from financing activities:

    (Decrease) increase in short-term debt                                                                                                         (685)                            685

    Proceeds from issuance of long-term debt                                                                                                      14,805                           1,483

    Repayments of long-term debt                                                                                                                 (2,902)                        (3,100)

    Payment of contingent consideration                                                                                                             (58)                              -

    Dividends paid                                                                                                                               (1,576)                        (1,288)

    Proceeds from exercise of stock options                                                                                                          299                             421

    Excess tax benefits from stock-based compensation                                                                                                127                             106

    Repurchase of common stock                                                                                                                   (5,001)                        (4,001)

    Other                                                                                                                                            (3)                              -
                                                                                                                                                     ---                             ---

    Net cash provided by (used in) financing activities                                                                                            5,006                         (5,694)
                                                                                                                                                   -----                          ------

    Effect of exchange rates on cash                                                                                                                (20)                            (6)
                                                                                                                                                     ---                             ---

    Net decrease in cash and cash equivalents                                                                                                       (22)                        (1,608)

    Cash and cash equivalents at the beginning of the year                                                                                         2,481                           4,089
                                                                                                                                                   -----                           -----

    Cash and cash equivalents at the end of the year                                                                                                       $2,459                          $2,481
                                                                                                                                                           ======                          ======

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

    Net income                                                                                                                                             $5,239                          $4,644

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

    Depreciation and amortization                                                                                                                  2,092                           1,931

    Stock-based compensation                                                                                                                         230                             165

    Loss on early extinguishment of debt                                                                                                               -                            521

    Deferred income taxes and other non-cash items                                                                                                 (266)                           (58)

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

    Accounts receivable, net                                                                                                                     (1,594)                          (737)

    Inventories                                                                                                                                  (1,141)                          (770)

    Other current assets                                                                                                                             355                           (383)

    Other assets                                                                                                                                       2                               9

    Accounts payable and claims and discounts payable                                                                                              2,834                           1,742

    Accrued expenses                                                                                                                                 765                           1,060

    Other long-term liabilities                                                                                                                    (104)                             13
                                                                                                                                                    ----                             ---

    Net cash provided by operating activities                                                                                                              $8,412                          $8,137
                                                                                                                                                           ======                          ======


                                                                                                                                                 Adjusted Earnings Per Share

                                                                                                                                                         (Unaudited)


    The Company is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the Company's performance. This
     information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.


    The following is a reconciliation of income before income tax provision to Adjusted earnings per share:


                                                                                                                                                                         Three Months Ended                             Year Ended

                                                                                                                                                                            December 31,                               December 31,
                                                                                                                                                                            ------------                               ------------

    In millions, except per share amounts                                                                                                                                 2015                   2014                      2015                   2014
    -------------------------------------                                                                                                                                 ----                   ----

    Income before income tax provision                                                                                                                                            $2,453                                          $2,190                                          $8,616                                          $7,678

    Non-GAAP adjustments:

    Amortization of intangible assets                                                                                                                                      191                                128                                 611                                 518

    Acquisition-related bridge financing costs(1)                                                                                                                            -                                 -                                 52                                   -

    Acquisition-related transaction and integration costs(1)                                                                                                                72                                  -                                220                                   -

    Charge related to a disputed 1999 legal settlement                                                                                                                      90                                  -                                 90                                   -

    Loss on early extinguishment of debt                                                                                                                                     -                                 -                                  -                                521
                                                                                                                                                                           ---                               ---                                ---                                ---

    Adjusted income before income tax provision                                                                                                                          2,806                              2,318                               9,589                               8,717

    Adjusted income tax provision                                                                                                                                        1,093                                919                               3,750                               3,444
                                                                                                                                                                         -----                                ---                               -----                               -----

    Adjusted income from continuing operations                                                                                                                           1,713                              1,399                               5,839                               5,273

    Net income attributable to noncontrolling interest                                                                                                                     (1)                                 -                                (2)                                  -

    Income allocable to participating securities                                                                                                                           (8)                               (6)                               (27)                               (19)

    Adjusted income from continuing operations attributable to CVS Health                                                                                                         $1,704                                          $1,393                                          $5,810                                          $5,254
                                                                                                                                                                                  ======                                          ======                                          ======                                          ======


    Weighted average diluted shares outstanding                                                                                                                          1,114                              1,152                               1,126                               1,169


    Adjusted earnings per share                                                                                                                                                    $1.53                                           $1.21                                           $5.16                                           $4.49
                                                                                                                                                                                   =====                                           =====                                           =====                                           =====


    (1)       Costs associated with the acquisitions of Omnicare and the pharmacies and clinics of Target.


                                                   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:


                                                           Year Ended

                                                          December 31,
                                                          ------------

    In millions                                         2015                   2014
    -----------

    Net cash provided by
     operating activities(1)                                    $8,412                                          $8,137

    Subtract: Additions to
     property and equipment                          (2,367)                           (2,136)

    Add: Proceeds from sale-
     leaseback transactions                              411                                515

    Free cash flow                                              $6,456                                          $6,516
                                                                ======                                          ======


    (1)       Cash provided by operating activities for the year ended December 31, 2015 includes $52 million of pre-
     tax acquisition-related bridge financing costs and $220 million of pre-tax acquisition-related transaction and
     integration costs.


                                                                                                                                  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:


    In millions                                                                  Pharmacy               Retail/LTC               Corporate                 Intersegment                Consolidated

                                                                                 Services                Segment                   Segment               Eliminations(2)                  Totals

                                                                                Segment(1)
    ---                                                                         ---------

    Three Months Ended

    December 31, 2015:

    Net revenues                                                                              $26,514                                           $19,903                                             $              -                                        $(5,272)                                   $41,145

    Gross profit                                                                     1,492                                6,002                                          -                                     (193)                                7,301

    Operating profit (loss)(3)                                                       1,152                                2,079                                      (325)                                     (177)                                2,729

    December 31, 2014:

    Net revenues                                                                    23,874                               17,698                                          -                                   (4,517)                               37,055

    Gross profit                                                                     1,238                                5,558                                          -                                     (163)                                6,633

    Operating profit (loss)                                                            909                                1,780                                      (205)                                     (163)                                2,321

    Year Ended

    December 31, 2015:

    Net revenues                                                                   100,363                               72,007                                          -                                  (19,080)                              153,290

    Gross profit                                                                     5,227                               21,992                                          -                                     (691)                               26,528

    Operating profit (loss)(3)                                                       3,989                                7,130                                    (1,037)                                     (628)                                9,454

    December 31, 2014:

    Net revenues                                                                    88,440                               67,798                                          -                                  (16,871)                              139,367

    Gross profit                                                                     4,771                               21,277                                          -                                     (681)                               25,367

    Operating profit (loss)(3)                                                       3,514                                6,762                                      (796)                                     (681)                                8,799


    (1)   Net revenues of the Pharmacy Services Segment include approximately $2.1 billion and $1.9 billion of retail co-payments for the three months ended December 31, 2015 and 2014, respectively, as well as $8.9 billion and $8.1 billion of retail co-payments for the year ended December 31,
     2015 and 2014, 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 retail
     stores to purchase covered products, when members enrolled in programs such as Maintenance Choice(R) elect to pick up maintenance prescriptions at a retail drugstore instead of receiving them through the mail, or when members have prescriptions filled at long-term care facilities. 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 Corporate Segment includes $20 million and $156 million of acquisition-related transaction and integration costs related to the acquisition of Omnicare and the pharmacy and clinics of target for the three months and year ended December 31, 2015, respectively. For the three months
     and year ended December 31, 2015, the Corporate Segment also included a $90 million charge related to a legacy lawsuit challenging the 1999 legal settlement by MedPartners of various securities class actions and a related derivative claim.


                                                                                                                   Supplemental Information

                                                                                                                          (Unaudited)


    Pharmacy Services Segment


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


                                                                                                           Three Months Ended                                  Year Ended

                                                                                                              December 31,                                    December 31,
                                                                                                              ------------                                    ------------

    In millions                                                                                           2015                      2014                            2015                     2014
    -----------                                                                                           ----                      ----                            ----                     ----

    Net revenues                                                                                                  $26,514                                         $23,874                                         $100,363                                         $88,440

    Gross profit                                                                                                   $1,492                                          $1,238                                           $5,227                                          $4,771

    Gross profit % of net revenues                                                                        5.6%                               5.2%                                 5.2%                              5.4%

    Operating expenses                                                                                               $340                                            $329                                           $1,238                                          $1,257

    Operating expense % of net revenues                                                                   1.3%                               1.4%                                 1.2%                              1.4%

    Operating profit                                                                                               $1,152                                            $909                                           $3,989                                          $3,514

    Operating profit % of net revenues                                                                    4.3%                               3.8%                                 4.0%                              4.0%

    Net revenues:

    Mail choice(1)                                                                                                $10,235                                          $8,440                                          $37,828                                         $31,081

    Pharmacy network(2)                                                                                           $16,198                                         $15,374                                          $62,240                                         $57,122

    Other                                                                                                             $81                                             $60                                             $295                                            $237

    Pharmacy claims processed:

    Total                                                                                                259.6                               242.9                               1,011.9                              932.0

    Mail choice(1)                                                                                        22.2                                21.3                                  85.7                               82.4

    Pharmacy network(2)                                                                                  237.4                               221.6                                 926.2                              849.6

    Generic dispensing rate:

    Total                                                                                                83.7%                              82.1%                                83.7%                             82.2%

    Mail choice(1)                                                                                       76.5%                              75.1%                                76.4%                             74.6%

    Pharmacy network(2)                                                                                  84.4%                              82.7%                                84.4%                             83.0%

    Mail choice penetration rate                                                                         20.7%                              21.3%                                20.6%                             21.4%


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

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


                                                                                                                                       Supplemental Information

                                                                                                                                              (Unaudited)


    Retail/LTC Segment


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


                                                                                                                          Three Months Ended                                     Year Ended

                                                                                                                             December 31,                                       December 31,
                                                                                                                             ------------                                       ------------

    In millions                                                                                                           2015                       2014                          2015                       2014
    -----------                                                                                                           ----                       ----

    Net revenues                                                                                                                   $19,903                                                 $17,698                                                 $72,007                                            $67,798

    Gross profit                                                                                                                    $6,002                                                  $5,558                                                 $21,992                                            $21,277

    Gross profit % of net revenues                                                                                       30.2%                                   31.4%                                    30.5%                                    31.4%

    Operating expenses(1)                                                                                                           $3,923                                                  $3,778                                                 $14,862                                            $14,515

    Operating expense % of net revenues                                                                                  19.7%                                   21.3%                                    20.6%                                    21.4%

    Operating profit                                                                                                                $2,079                                                  $1,780                                                  $7,130                                             $6,762

    Operating profit % of net revenues                                                                                   10.4%                                   10.1%                                     9.9%                                    10.0%

    Prescriptions filled (90 Day = 3 Rx) (2)                                                                             287.5                                    244.8                                   1,031.6                                     935.9

    Net revenue increase (decrease):

    Total                                                                                                                12.5%                                    2.9%                                     6.2%                                     3.3%

    Pharmacy                                                                                                             16.7%                                    5.5%                                     9.5%                                     5.1%

    Front store                                                                                                           1.2%                                  (4.9)%                                   (2.5)%                                   (2.5)%

    Total prescription volume (90 Day = 3 Rx) (2)                                                                         7.1%                                    6.7%                                    10.2%                                     5.2%

    Same store increase (decrease)(3):

    Total sales                                                                                                           3.5%                                    1.6%                                     1.7%                                     2.1%

    Pharmacy sales                                                                                                        5.0%                                    5.5%                                     4.5%                                     4.8%

    Front store sales(4)                                                                                                (0.5)%                                  (7.2)%                                   (5.0)%                                   (4.0)%

    Prescription volume (90 Day = 3 Rx) (2)                                                                               5.0%                                    5.3%                                     4.8%                                     4.1%

    Generic dispensing rate                                                                                              84.0%                                   82.4%                                    84.5%                                    83.1%

    Pharmacy % of total revenues                                                                                         73.9%                                   71.2%                                    72.9%                                    70.7%


    (1)   Operating expenses for the three months and year ended December 31, 2015 include $52 million and $64 million, respectively, of acquisition-related integration costs related to the acquisition of Omnicare and the pharmacies and clinics of Target.

    (2)   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.

    (3)   Same store sales and prescriptions exclude revenues from MinuteClinic(R), and revenue and prescriptions from stores in Brazil, long-term care operations and from commercialization services.

    (4)   Front store same store sales would have been approximately 520 basis points higher for the year ended December 31, 2015 if tobacco and the estimated associated basket sales were excluded from the year ended December 31, 2014.


                                                                                                 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.

    In millions, except per share amounts                                                                                                                                    Year Ending

                                                                                                                                                                          December 31, 2016
    ---                                                                                                                                                                   -----------------

    Income before income tax provision(1)                                                                                                                                         $9,394                                          $9,670

    Non-GAAP adjustments:

    Amortization of intangible assets                                                                                                                                      800                                798
                                                                                                                                                                           ---                                ---

    Adjusted income before income tax provision                                                                                                                         10,194                             10,468

    Adjusted income tax provision                                                                                                                                        3,974                              4,078
                                                                                                                                                                         -----                              -----

    Adjusted income from continuing operations                                                                                                                           6,220                              6,390

    Net income attributable to noncontrolling interest                                                                                                                     (7)                               (7)

    Income allocable to participating securities                                                                                                                          (30)                              (30)

    Adjusted income from continuing operations attributable to CVS Health                                                                                                         $6,183                                          $6,353
                                                                                                                                                                                  ======                                          ======

    Weighted average diluted shares outstanding                                                                                                                          1,080                              1,080

    Adjusted earnings per share                                                                                                                                                    $5.73                                           $5.88
                                                                                                                                                                                   =====                                           =====


    In millions, except per share amounts                                                                                                                                Three Months Ending

                                                                                                                                                                           March 31, 2016
    ---                                                                                                                                                                    --------------

    Income before income tax provision(1)                                                                                                                                         $1,883                                          $1,939

    Non-GAAP adjustments:

    Amortization of intangible assets                                                                                                                                      202                                202
                                                                                                                                                                           ---                                ---

    Adjusted income before income tax provision                                                                                                                          2,085                              2,141

    Adjusted income tax provision                                                                                                                                          824                                846
                                                                                                                                                                           ---                                ---

    Adjusted income from continuing operations                                                                                                                           1,261                              1,295

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

    Income allocable to participating securities                                                                                                                           (6)                               (6)

    Adjusted income from continuing operations attributable to CVS Health                                                                                                1,253                              1,287
                                                                                                                                                                         =====                              =====

    Weighted average diluted shares outstanding                                                                                                                          1,098                              1,098

    Adjusted earnings per share                                                                                                                                                    $1.14                                           $1.17
                                                                                                                                                                                   =====                                           =====


    (1)   Excludes acquisition-related integration costs for the acquisitions of Omnicare and the pharmacies and clinics of Target.


                                               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. 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.


    In millions                                            Year Ending

                                                        December 31, 2016
    ---                                                 -----------------

    Net cash provided by
     operating activities                                       $7,575                                          $7,875

    Subtract: Additions to
     property and equipment                          (2,550)                           (2,450)

    Add: Proceeds from sale-
     leaseback transactions                              275                                175
                                                         ---                                ---

    Free cash flow                                              $5,300                                          $5,600
                                                                ======                                          ======

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SOURCE CVS Health

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