This excerpt taken from the CVS 8-K filed Feb 1, 2007.
FOURTH QUARTER DILUTED EPS WERE $0.49, INCLUDING NON-RECURRING ITEMS
WOONSOCKET, RHODE ISLAND, February 1, 2007 - CVS Corporation (NYSE: CVS) today announced sales and earnings for the fourth quarter and fiscal year ended December 30, 2006.
Net earnings for the fourth quarter increased 2.7% to $417.2 million or $0.49 per diluted share, compared with net earnings of $406.4 million or $0.48 per diluted share in the fourth quarter of 2005. Net earnings for the full year 2006 increased to a record $1.4 billion, or $1.60 per diluted share, up 10.3% from $1.45 per diluted share reported in 2005. The Company estimates that the acquisition of 701 standalone Sav-on and Osco drugstores on June 2, 2006, had a negative impact of approximately $0.05 and $0.12 per diluted share in the fourth quarter and the full year of 2006 respectively. The Company generated more than $560 million in free cash flow for the year. Fourth quarter results were driven by healthy sales growth and a significant improvement in gross margin, driven primarily by the increasing usage of generic drugs.
During the fourth quarter of 2006, the Company adopted Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). In connection with adopting SAB 108, the Company recorded adjustments for immaterial misstatements, which collectively reduced total operating expenses by $40.2 million. The adjustments generated a non-cash one-time benefit of approximately 3 cents per diluted share for the fourth quarter and the full year of 2006.
In addition, during the fourth quarter of 2006, the Company reversed approximately $10 million of previously recorded tax reserves through the income tax provision. The reversal generated a non-cash benefit to diluted earnings per share for the fourth quarter and the full fiscal year of one cent. During the fourth quarter of 2005, the Company reversed $52.6 million of previously recorded tax reserves through the income tax provision. The 2005 reversal generated a non-cash benefit to diluted earnings per share for the fourth quarter and the full fiscal year of 6 cents.
2006 was an outstanding year for CVS, stated Tom Ryan, Chairman of the Board, President, and Chief Executive Officer of CVS Corporation. We fired on all cylinders, delivering sales, margin, earnings, and free cash flow ahead of our plan. In addition to that, we took several important steps that will enhance our future growth.
We acquired about 700 Sav-on and Osco stores from Albertsons in June and were now weeks away from completing another successful integration. At the same time, we opened 265 new or relocated stores, adding 3.2% organic retail square footage growth to our newly-expanded base of stores. And, we continued to benefit from the sales turnaround of the stores we acquired from Eckerd in 2004.
Mr. Ryan continued, We also acquired Minute Clinic, the pioneer in retail-based health clinics. Weve since nearly doubled the number of clinics to 155 across 19 states, and we intend to roll them out nationally so all our customers have access to this convenient and cost-effective service.
Of course, the biggest news was the announcement of our merger of equals with Caremark, which will create the nations premier pharmacy services provider. Consumers and payors are looking for solutions and we will lead the way by bringing new and differentiated offerings to the marketplace. Weve already received regulatory clearance from the FTC. Our registration statement has been declared effective by the SEC, and we look forward to closing the deal in a few weeks upon receipt of approval from the shareholders of CVS and Caremark.
I couldnt be more proud of the dedicated colleagues who worked so hard to make 2006 a success by every measure, concluded Mr. Ryan.
Net sales for the thirteen-week period ended December 30, 2006 increased 24.0% to a record $12.1 billion, up from $9.7 billion during the thirteen-week period ended December 31, 2005. Same store sales (sales from stores open more than one year) for the quarter rose 8.7%, while pharmacy same store sales rose 10.2% and front-end same store sales increased 5.5%. Same store sales do not include the sales results of the drugstores acquired on June 2, 2006. These acquired stores will be included in same store sales following the one-year anniversary of the acquisition, beginning in fiscal July 2007. For the full year, total sales for the fifty-two week period ended December 30, 2006, increased 18.4% to a record $43.8 billion, compared to $37.0 billion in 2005. Same store sales for the year increased 8.2%, while pharmacy same store sales increased 9.1% and front-end same store sales increased 6.2%. Total pharmacy sales represented 68.4% and 69.6% of total company sales for the quarter and year respectively. Third party prescription sales were 94.9% of pharmacy sales for the quarter, and 94.7% for the year.
For the year, CVS opened 147 new stores, acquired 701 stores, closed 117 stores and relocated 118 others. As of December 30, 2006, CVS operated 6,202 retail and specialty pharmacy stores in 43 states and the District of Columbia.
The Company will be holding a conference call this morning for the investment community at 8:30 a.m. (ET) to discuss the quarterly results. An audio webcast of the conference call will be broadcast simultaneously through the Investor Relations portion of the CVS website for all interested parties. To access the webcast, visit http://investor.CVS.com. This webcast will be archived and available on the web site for a one-month period following the conference call.
As reported in a separate press release today, January revenues increased 24.2% to $3.7 billion, compared to $3.0 billion in the prior year period. January same store sales rose 8.6%, while pharmacy same store sales increased 8.7% and front-end same store sales increased 8.2%.
CVS is Americas largest retail pharmacy, operating approximately 6,200 retail and specialty pharmacy stores in 43 states and the District of Columbia. With more than 40 years of dynamic growth in the retail pharmacy industry, CVS is committed to being the easiest pharmacy retailer for customers to use. CVS innovatively serves the healthcare needs of all customers through its CVS/pharmacy stores; its online pharmacy, CVS.com; its retail-based health clinic subsidiary, MinuteClinic; and its pharmacy benefit management, mail order and specialty pharmacy subsidiary, PharmaCare. General information about CVS is available through the Investor Relations portion of the Companys website, at http://investor.CVS.com as well as through the pressroom portion of the Companys website, at www.cvs.com/pressroom.
This press release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those in any such forward-looking statements. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations ~ Cautionary Statement Concerning Forward-Looking Statements in its Quarterly Report on Form 10-Q for the period ended September 30, 2006 and under the captions Risk Factors and Cautionary Statement Regarding Forward Looking Statements in the Joint Proxy Statement and Prospectus filed by the Company with the Securities and Exchange Commission in connection with its proposed merger with Caremark.