WOONSOCKET – CVS Health Corp. posted net income of $1.4 billion in the third quarter of 2018, an 8.2 percent increase year over year, as diluted earnings per share increased to $1.36 from $1.26 one year prior.
Revenue for the quarter was $47.3 billion, a 2.4 percent increase from $46.2 billion in the third quarter of 2017.
Year to date, the company’s cash and cash equivalents increased from $1.6 billion to $41.6 billion, driven by the issuance of long-term debt, which brought in $39.4 billion. The cash infusion is necessary to fund CVS Health’s acquisition of Aetna Inc., which it expects to close by Thanksgiving.
The company noted that its income tax rate fell to 26.8 percent for the three months ended Sept. 30, compared with an effective tax rate of 37.7 percent in the same 2017 period, primarily due to the federal tax reform enacted at the end of 2017, which produced a $509 million income tax provision compared with $777 million in the 2017 third quarter. So far in 2018, CVS has recorded an income tax provision of $1.5 billion, compared with $2.1 billion in the same 2017 period.
The company’s pharmacy services segment reported $33.8 billion in revenue for the quarter, a 2.6 percent increase from the third quarter of 2017. The operating profit of the segment was $1.35 billion, compared with an adjusted $1.33 billion the year prior. (The company adjusted its cost allocation methodology since the third quarter of 2018.)
CVS’ retail segment reported revenue of $20.9 billion revenue for the period, a 6.4 percent year-over-year increase. Operating profit was $1.5 billion, which represented a 5.7 percent decline over the year.
The company said that same-store sales increased 6.7 percent over the year, with pharmacy same-store sales growing 8.7 percent and front-store same-store sales increasing 0.8 percent year over year in the third quarter.
The company also said that it expected to close its acquisition of Aetna before Thanksgiving. It noted that it already had received approval from 23 of the 28 states that require changes in control filings. It also noted that the companies are prepared for the divestiture of Aetna’s standalone Medicare Part D prescription drug plans, which have an aggregate of 2.2 million members as part of a deal reached with the U.S. Department of Justice.
“As we approach the closing of our transformative acquisition of Aetna, our integration teams are making great progress to assure that once final approvals are obtained, we can begin to execute on our integration plans,” said CVS President and CEO Larry J. Merlo in a statement.
“While CVS and Aetna remain separate companies today, the performance of both companies highlights the very solid financial foundation on which we’ll build our revolutionary new model that will transform the health care experience for consumers and, in the process, deliver substantial value for our shareholders,” Merlo added.
Chris Bergenheim is the PBN web editor. Email him at Bergenheim@PBN.com.
