CVS Health Corporation Supplemental Financial Information Preliminary and Unaudited Earnings Release February 10, 2015 The information in this report includes non-gaap financial measures related to our company s performance, namely EBITDA and Adjusted EPS. In accordance with SEC regulations, the definitions of the non-gaap items mentioned, as well as the reconciliations to comparable GAAP measures, are available on the investor relations portion of our website at investors.cvshealth.com. Preliminary and Unaudited (Revised r2) 1 of 9 February 10, 2015
Supplemental Information: Consolidated Statement of Income (In millions, except per share amounts) (4) (1) 2013 (2) Change Net revenues $ 37,055.3 $ 32,829.8 12.9% $ 139,367.2 $ 126,761.0 9.9% Cost of revenues 30,421.6 26,492.0 14.8% 113,999.8 102,978.5 10.7% Gross profit 6,633.8 6,337.8 4.7% 25,367.4 23,782.5 6.7% gross margin 17.9% 19.3% (140) bps 18.2% 18.8% (56) bps Operating expenses 4,312.9 4,121.5 (4.6%) 16,568.3 15,745.9 (5.2%) as a % of net revenues 11.6% 12.6% 92 bps 11.9% 12.4% 53 bps Operating profit $ 2,320.9 $ 2,216.3 4.7% $ 8,799.1 $ 8,036.7 9.5% operating margin 6.3% 6.8% (49) bps 6.3% 6.3% (3) bps Interest expense, net 131.1 135.2 (3.0%) 600.5 509.5 17.9% Loss on early extinguishment of debt and foreign currency losses 0.1 0.0 NM 520.6 0.0 NM Income before income tax provision 2,189.6 2,081.1 5.2% 7,678.0 7,527.1 2.0% Amortization 127.9 123.7 (3.4%) 518.4 493.8 (5.0%) Adjusted income before income tax provision 2,317.5 2,204.8 5.1% 8,196.5 8,020.9 2.2% Adjusted income tax provision (3) 918.6 864.8 (6.2%) 3,237.6 3,120.1 (3.8%) effective tax rate 39.6% 39.2% (41) bps 39.5% 38.9% (60) bps Earnings allocated to participating securities 5.9-19.2 - Adjusted income from continuing operations 1,393.0 1,339.9 4.0% 4,939.6 4,900.8 0.8% as a % of net revenues 3.8% 4.1% (32) bps 3.5% 3.9% (32) bps Net income attributable to noncontrolling interest (0.3) - (0.9) - Adjusted income from cont ops attributable to CVS Health $ 1,392.7 $ 1,339.9 3.9% $ 4,938.8 $ 4,900.8 0.8% as a % of net revenues 3.8% 4.1% (32) bps 3.5% 3.9% (32) bps Weighted average diluted common shares outstanding 1,151.6 1,201.0 4.1% 1,169.0 1,226.2 4.7% Adjusted EPS from continuing operations $ 1.21 $ 1.12 8.4% $ 4.22 $ 4.00 5.7% Depreciation 360.8 334.1 (8.0%) 1,412.4 1,375.8 (2.7%) Depreciation and amortization 488.7 457.7 (6.8%) 1,930.9 1,869.6 (3.3%) EBITDA $ 2,809.6 $ 2,674.0 5.1% $ 10,730.0 $ 9,906.3 8.3% as a % of net revenues 7.6% 8.1% (56) bps 7.7% 7.8% (12) bps 1 Includes a $521 million loss on early extinguishment of debt (approximately $0.27 per diluted share) during the year ended. Excluding this item, Adjusted EPS for the year ended, was $4.49. 2 Includes a $72 million gain on a legal settlement (approximately $0.04 per diluted share) during the year ended 2013. Excluding this item, Adjusted EPS for the year ended 2013, was $3.96. 3 The adjusted income tax provision is computed using the effective income tax rate computed from the consolidated statement of income. 4 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 2 of 9 February 10, 2015
Supplemental Information: Consolidated Statement of Income (Excluding Non-recurring Charges and Gains) (In millions, except per share amounts) (4) (1) 2013 (2) Change Net revenues $ 37,055.3 $ 32,829.8 12.9% $ 139,367.2 $ 126,761.0 9.9% Cost of revenues 30,421.6 26,492.0 14.8% 113,999.8 102,978.5 10.7% Gross profit 6,633.8 6,337.8 4.7% 25,367.4 23,782.5 6.7% gross margin 17.9% 19.3% (140) bps 18.2% 18.8% (56) bps Operating expenses 4,312.9 4,121.5 (4.6%) 16,568.3 15,817.7 (4.7%) as a % of net revenues 11.6% 12.6% 92 bps 11.9% 12.5% 59 bps Operating profit $ 2,320.9 $ 2,216.3 4.7% $ 8,799.1 $ 7,964.9 10.5% operating margin 6.3% 6.8% (49) bps 6.3% 6.3% 3 bps Interest expense, net 131.1 135.2 (3.0%) 600.5 509.5 17.9% Loss on early extinguishment of debt and foreign currency losses Income before income tax provision 0.1 0.0 NM 0.1 0.0 NM 2,189.6 2,081.1 5.2% 8,198.5 7,455.3 10.0% Amortization 127.9 123.7 (3.4%) 518.4 493.8 (5.0%) Adjusted income before income tax provision 2,317.5 2,204.8 5.1% 8,717.0 7,949.1 9.7% Adjusted income tax provision (3) 918.6 864.8 (6.2%) 3,443.2 3,092.2 (11.4%) effective tax rate 39.6% 39.2% (41) bps 39.5% 38.9% (60) bps Earnings allocated to participating securities 5.9-19.2 - Adjusted income from continuing operations 1,393.0 1,339.9 4.0% 5,254.5 4,856.9 8.2% as a % of net revenues 3.8% 4.1% (32) bps 3.8% 3.8% (6) bps Net income attributable to noncontrolling interest (0.3) - (0.9) - Adjusted income from cont ops attributable to CVS Health $ 1,392.7 $ 1,339.9 3.9% $ 5,253.7 $ 4,856.9 8.2% as a % of net revenues 3.8% 4.1% (32) bps 3.8% 3.8% (6) bps Weighted average diluted common shares outstanding 1,151.6 1,201.0 4.1% 1,169.0 1,226.2 4.7% Adjusted EPS from continuing operations $ 1.21 $ 1.12 8.4% $ 4.49 $ 3.96 13.5% Depreciation 360.8 334.1 (8.0%) 1,412.4 1,375.8 (2.7%) Depreciation and amortization 488.7 457.7 (6.8%) 1,930.9 1,869.6 (3.3%) EBITDA $ 2,809.6 $ 2,674.0 5.1% $ 10,730.0 $ 9,834.5 9.1% as a % of net revenues 7.6% 8.1% (56) bps 7.7% 7.8% (6) bps 1 Excludes a $521 million loss on early extinguishment of debt (approximately $0.27 per diluted share) during the year ended. Including this item, Adjusted EPS for the year ended, was $4.22. 2 Excludes a $72 million gain on a legal settlement (approximately $0.04 per diluted share) during the year ended 2013. Including this item, Adjusted EPS for the year ended 2013, was $4.00. 3 The adjusted income tax provision is computed using the effective income tax rate computed from the consolidated statement of income. 4 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 3 of 9 February 10, 2015
Supplemental Information: Pharmacy Services Segment (In millions, except per share amounts) (3) 2013 (1) Change Net revenues $ 23,874.2 $ 19,615.0 21.7% $ 88,439.8 $ 76,208.2 16.1% Cost of revenues 22,636.1 18,403.4 23.0% 83,669.2 71,971.3 16.3% Gross profit 1,238.2 1,211.6 2.2% 4,770.6 4,236.9 12.6% gross margin 5.2% 6.2% (99) bps 5.4% 5.6% (17) bps Operating expenses 329.5 311.2 (5.9%) 1,256.6 1,150.3 (9.2%) as a % of net revenues 1.4% 1.6% 21 bps 1.4% 1.5% 9 bps Operating profit $ 908.7 $ 900.4 0.9% $ 3,514.1 $ 3,086.6 13.8% operating margin 3.8% 4.6% (78) bps 4.0% 4.1% (8) bps Depreciation and amortization 161.4 142.1 (13.6%) 629.9 559.7 (12.5%) EBITDA $ 1,070.1 $ 1,042.4 2.7% $ 4,143.9 $ 3,646.2 13.6% as a % of net revenues 4.5% 5.3% (83) bps 4.7% 4.8% (10) bps Net revenues: Mail choice 8,440.6 6,516.0 29.5% 31,081.0 24,790.5 25.4% Pharmacy network 15,374.2 13,047.9 17.8% 57,122.3 51,211.1 11.5% Other 59.5 51.1 16.3% 236.6 206.6 14.5% Pharmacy claims processed: Total 242.9 225.9 7.5% 932.0 902.1 3.3% Mail choice 21.3 21.0 1.4% 82.4 83.3 (1.1%) Pharmacy network 221.6 204.9 8.2% 849.6 818.8 3.8% Total adjusted claims (2) 281.5 265.1 6.2% 1,081.5 1,057.4 2.3% Generic dispensing rate: Total 82.1% 80.8% 127 bps 82.2% 80.5% 175 bps Mail choice 75.1% 73.2% 190 bps 74.6% 72.6% 201 bps Pharmacy network 82.7% 81.6% 117 bps 83.0% 81.3% 169 bps Mail choice penetration rate 21.3% 22.7% (145) bps 21.4% 22.6% (113) bps 1 Includes an $11 million gain on a legal settlement during the year ended 2013. 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 30-day prescription. 3 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 4 of 9 February 10, 2015
Supplemental Information: Pharmacy Services Segment (Excluding Non-recurring Charges and Gains) (In millions, except per share amounts) (3) 2013 (1) Change Net revenues $ 23,874.2 $ 19,615.0 21.7% $ 88,439.8 $ 76,208.2 16.1% Cost of revenues 22,636.1 18,403.4 23.0% 83,669.2 71,971.3 16.3% Gross profit 1,238.2 1,211.6 2.2% 4,770.6 4,236.9 12.6% gross margin 5.2% 6.2% (99) bps 5.4% 5.6% (17) bps Operating expenses 329.5 311.2 (5.9%) 1,256.6 1,161.8 (8.2%) as a % of net revenues 1.4% 1.6% 21 bps 1.4% 1.5% 10 bps Operating profit $ 908.7 $ 900.4 0.9% $ 3,514.1 $ 3,075.1 14.3% operating margin 3.8% 4.6% (78) bps 4.0% 4.0% (6) bps Depreciation and amortization 161.4 142.1 (13.6%) 629.9 559.7 (12.5%) EBITDA $ 1,070.1 $ 1,042.4 2.7% $ 4,143.9 $ 3,634.8 14.0% as a % of net revenues 4.5% 5.3% (83) bps 4.7% 4.8% (8) bps Net revenues: Mail choice 8,440.6 6,516.0 29.5% 31,081.0 24,790.5 25.4% Pharmacy network 15,374.2 13,047.9 17.8% 57,122.3 51,211.1 11.5% Other 59.5 51.1 16.3% 236.6 206.6 14.5% Pharmacy claims processed: Total 242.9 225.9 7.5% 932.0 902.1 3.3% Mail choice 21.3 21.0 1.4% 82.4 83.3 (1.1%) Pharmacy network 221.6 204.9 8.2% 849.6 818.8 3.8% Total adjusted claims (2) 281.5 265.1 6.2% 1,081.5 1,057.4 2.3% Generic dispensing rate: Total 82.1% 80.8% 127 bps 82.2% 80.5% 175 bps Mail choice 75.1% 73.2% 190 bps 74.6% 72.6% 201 bps Pharmacy network 82.7% 81.6% 117 bps 83.0% 81.3% 169 bps Mail choice penetration rate 21.3% 22.7% (145) bps 21.4% 22.6% (113) bps 1 Excludes an $11 million gain on a legal settlement during the year ended 2013. 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 30-day prescription. 3 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 5 of 9 February 10, 2015
Supplemental Information: Retail Pharmacy Segment (In millions, except per share amounts) (3) 2013 (1) Change Net revenues $ 17,698.0 $ 17,191.8 2.9% $ 67,797.9 $ 65,618.2 3.3% Cost of revenues 12,139.9 11,908.1 1.9% 46,520.7 45,506.3 2.2% Gross profit 5,558.2 5,283.7 5.2% 21,277.2 20,111.9 5.8% gross margin 31.4% 30.7% 67 bps 31.4% 30.6% 73 bps Operating expenses 3,778.4 3,612.3 (4.6%) 14,515.2 13,844.2 (4.8%) as a % of net revenues 21.3% 21.0% (34) bps 21.4% 21.1% (31) bps Operating profit $ 1,779.7 $ 1,671.4 6.5% $ 6,761.9 $ 6,267.7 7.9% operating margin 10.1% 9.7% 33 bps 10.0% 9.6% 42 bps Depreciation and amortization 303.1 291.9 (3.8%) 1,204.9 1,217.3 1.0% EBITDA $ 2,082.8 $ 1,963.3 6.1% $ 7,966.9 $ 7,485.1 6.4% as a % of net revenues 11.8% 11.4% 35 bps 11.8% 11.4% 34 bps Net revenues increase (decrease): Total 2.9% 5.6% (264) bps 3.3% 3.1% 21 bps Pharmacy 5.5% 8.5% (302) bps 5.1% 4.1% 105 bps Front store (4.9%) (0.5%) (435) bps (2.5%) 1.0% (347) bps Same-store increase (decrease): Total sales 1.6% 4.0% (240) bps 2.1% 1.7% 40 bps Pharmacy sales 5.5% 6.8% (130) bps 4.8% 2.6% 220 bps Front store sales (7.2%) (1.9%) (530) bps (4.0%) (0.5%) (350) bps Total prescription volume 3.2% 0.8% 240 bps 2.0% 1.5% 50 bps Total adj. prescription volume* 5.3% 3.8% 150 bps 4.1% 4.4% (30) bps Generic dispensing rate 82.4% 81.0% 140 bps 83.1% 81.4% 163 bps Rx % of net revenues 71.2% 69.5% 168 bps 70.7% 69.5% 117 bps 3 rd party % of Rx revenues 98.7% 98.1% 60 bps 98.6% 97.9% 70 bps Retail prescriptions filled 196.5 188.5 4.2% 755.9 734.3 2.9% Adj. retail prescriptions filled (2) 244.8 230.1 6.4% 935.9 890.6 5.1% 1 Includes a $61 million gain on a legal settlement during the year ended 2013. 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 30-day prescription. 3 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 6 of 9 February 10, 2015
Supplemental Information: Retail Pharmacy Segment (Excluding Non-recurring Charges and Gains) (In millions, except per share amounts) (3) 2013 (1) Change Net revenues $ 17,698.0 $ 17,191.8 2.9% $ 67,797.9 $ 65,618.2 3.3% Cost of revenues 12,139.9 11,908.1 1.9% 46,520.7 45,506.3 2.2% Gross profit 5,558.2 5,283.7 5.2% 21,277.2 20,111.9 5.8% gross margin 31.4% 30.7% 67 bps 31.4% 30.6% 73 bps Operating expenses 3,778.4 3,612.3 (4.6%) 14,515.2 13,904.6 (4.4%) as a % of net revenues 21.3% 21.0% (34) bps 21.4% 21.2% (22) bps Operating profit $ 1,779.7 $ 1,671.4 6.5% $ 6,761.9 $ 6,207.3 8.9% operating margin 10.1% 9.7% 33 bps 10.0% 9.5% 51 bps Depreciation and amortization 303.1 291.9 (3.8%) 1,204.9 1,217.3 1.0% EBITDA $ 2,082.8 $ 1,963.3 6.1% $ 7,966.9 $ 7,424.7 7.3% as a % of net revenues 11.8% 11.4% 35 bps 11.8% 11.3% 44 bps Net revenues increase (decrease): Total 2.9% 5.6% (264) bps 3.3% 3.1% 21 bps Pharmacy 5.5% 8.5% (302) bps 5.1% 4.1% 105 bps Front store (4.9%) (0.5%) (435) bps (2.5%) 1.0% (347) bps Same-store increase (decrease): Total sales 1.6% 4.0% (240) bps 2.1% 1.7% 40 bps Pharmacy sales 5.5% 6.8% (130) bps 4.8% 2.6% 220 bps Front store sales (7.2%) (1.9%) (530) bps (4.0%) (0.5%) (350) bps Total prescription volume 3.2% 0.8% 240 bps 2.0% 1.5% 50 bps Total adj. prescription volume* 5.3% 3.8% 150 bps 4.1% 4.4% (30) bps Generic dispensing rate 82.4% 81.0% 140 bps 83.1% 81.4% 163 bps Rx % of net revenues 71.2% 69.5% 168 bps 70.7% 69.5% 117 bps 3 rd party % of Rx revenues 98.7% 98.1% 60 bps 98.6% 97.9% 70 bps Retail prescriptions filled 196.5 188.5 4.2% 755.9 734.3 2.9% Adj. retail prescriptions filled (2) 244.8 230.1 6.4% 935.9 890.6 5.1% 1 Excludes a $61 million gain on a legal settlement during the year ended 2013. 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 30-day prescription. 3 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 7 of 9 February 10, 2015
Supplemental Information: Corporate Segment (In millions, except per share amounts) (1) Net revenues $ - $ - N/A $ - $ - N/A Cost of revenues - - N/A - - N/A Gross profit - - N/A - - N/A gross margin N/A N/A N/A N/A N/A N/A Operating expenses 205.0 198.0 (3.5%) 796.4 751.3 (6.0%) as a % of net revenues N/A N/A N/A N/A N/A N/A Operating profit $ (205.0) $ (198.0) (3.5%) $ (796.4) $ (751.3) (6.0%) operating margin N/A N/A N/A N/A N/A N/A Depreciation and amortization 24.2 23.8 (1.8%) 96.0 92.6 (3.7%) EBITDA $ (180.7) $ (174.3) (3.7%) $ (700.4) $ (658.7) (6.3%) as a % of net revenues N/A N/A N/A N/A N/A N/A 1 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 8 of 9 February 10, 2015
Supplemental Information: Eliminations (In millions, except per share amounts) (1) Net revenues $ (4,517.0) $ (3,977.1) (13.6%) $ (16,870.5) $ (15,065.4) (12.0%) Cost of revenues (4,354.4) (3,819.6) (14.0%) (16,190.1) (14,499.1) (11.7%) Gross profit (162.6) (157.5) (3.2%) (680.4) (566.3) (20.2%) gross margin 3.6% 4.0% (36) bps 4.0% 3.8% 27 bps Operating expenses - - N/A - - N/A as a % of net revenues N/A N/A N/A N/A N/A N/A Operating profit $ (162.6) $ (157.5) (3.2%) $ (680.4) $ (566.3) (20.2%) operating margin 3.6% 4.0% (36) bps 4.0% 3.8% 27 bps Depreciation and amortization - - N/A - - N/A EBITDA $ (162.6) $ (157.5) (3.2%) $ (680.4) $ (566.3) (20.2%) as a % of net revenues 3.6% 4.0% (36) bps 4.0% 3.8% 27 bps 1 Totals may not foot due to rounding. Preliminary and Unaudited (Revised r2) 9 of 9 February 10, 2015