CVS Caremark Corporation (CVS)

Earnings from continuing operations:

Earnings from continuing operations for the second quarter ended June 30, 2009, increased 8.0% to $889.1 million, compared with earnings from continuing operations of $823.5 million during the second quarter of 2008. Adjusted earnings per share from continuing operations, which excludes $107.3 million of intangible asset amortization related to acquisition activity, for the second quarter were $0.65, compared with $0.60 in the second quarter of 2008. GAAP earnings per diluted share from continuing operations for the second quarter of 2009 were $0.60, compared with $0.56 in the second quarter of 2008. Earnings from continuing operations for the six months ended June 30, 2009, increased 3.9% to $1.63 billion, compared with earnings from continuing operations of $1.57 billion during the six months ended June 28, 2008. Adjusted earnings per share from continuing operations, which excludes $214.8 million of intangible asset amortization related to acquisition activity, for the six months ended June 30, 2009, were $1.20, compared with $1.15 in the six months ended June 28, 2008. GAAP earnings per diluted share from continuing operations for the six months ended June 30, 2009 were $1.11, compared with $1.07 in the six months ended June 28, 2008.

The Company’s reported results include the impact of the Longs business, which has a lower operating margin, as well as integration expenses incurred related to the Longs acquisition. Additionally, reported expenses include the impact of the elimination of the joint venture with Universal American, the income from which was historically recorded as an offset to expenses.

Tom Ryan, Chairman, President, and Chief Executive Officer, said “I’m very pleased with our second quarter results, which were at the high end of our expectations. We saw solid revenue growth and cost control across our businesses, which led to 8% operating profit growth after one-time costs for the Longs integration. This is shaping up to be a very good year and we expect an even better 2010.”

Dave Rickard, Executive Vice President, Chief Administrative Officer and Chief Financial Officer, said, “Given our strong performance year to date as well as our optimism for the rest of the year, we’re raising our earnings guidance and narrowing the range. We now expect to deliver Adjusted EPS from continuing operations of $2.59 - $2.64 for the year, up from our previous guidance of $2.55 - $2.63. GAAP EPS from continuing operations is projected at $2.41 - $2.46, up from our previous guidance of $2.37 - $2.45.”

Loss from discontinued operations:

In connection with certain business dispositions completed between 1991 and 1997, the Company continues to guarantee store lease obligations for a number of former subsidiaries, including Linens ‘n Things. The Company’s loss from discontinued operations for the second quarter of 2009 includes $2.6 million ($4.3 million, net of a $1.7 million income tax benefit) of lease-related costs (i.e., interest accretion and legal fees). The loss from discontinued operations for the six months ended June 30, 2009 includes $7.7 million ($12.6 million, net of a $4.9 million income tax benefit) of lease-related costs. The loss from discontinued operations for the second quarter and six months ended June 28, 2008 was $48.7 million ($78.8 million, net of a $30.1 million income tax benefit) of lease-related costs.

Earnings from continuing operations:

Earnings from continuing operations for the first quarter ended March 31, 2009, decreased slightly to $743.5 million, compared with earnings from continuing operations of $748.5 million during the first quarter of 2008. Adjusted earnings per share from continuing operations, which excludes $107.5 million of intangible asset amortization related to acquisition activity, for the first quarter were $0.55, compared with $0.55 in the first quarter of 2008. GAAP earnings per diluted share from continuing operations for the first quarter of 2009 were $0.51, compared with $0.51 in the first quarter of 2008.

The Company’s reported results include the first full quarter’s impact of the Longs business, which has a lower operating margin, as well as integration expenses incurred related to the Longs acquisition. As previously reported, the first quarter reflects the short-term margin investments in key PBM contracts that should help drive long-term performance. Additionally, reported expenses include the impact of the elimination of the joint venture with Universal American, the income from which was historically recorded as an offset to expenses, as well as an increase in litigation reserves in the PBM related to pre-merger matters.

Tom Ryan, Chairman, President, and Chief Executive Officer, said, “I’m very pleased with our results in the first quarter, which are at the top of our expectations. Our performance reflects healthy underlying growth in our business, with solid revenue increases and share gains across the enterprise. Our “Mail Choice” prescription volumes, including mail order and Maintenance Choice, increased a robust 6.6% in the quarter; specialty mail revenues climbed 17%; and we posted a best-in-class generic dispensing rate. The Longs integration is right on track and the stores are performing well, even with the difficult California economy. Our retail same store sales continued to lead the industry, with strong results in both the pharmacy and the front store.”

Loss from discontinued operations:

In connection with certain business dispositions completed between 1991 and 1997, the Company continues to guarantee store lease obligations for a number of former subsidiaries, including Linens ‘n Things. The Company’s loss from discontinued operations for the first quarter of 2009 includes $5.1 million ($8.3 million, net of a $3.2 million income tax benefit) of lease-related costs (i.e., interest accretion and legal fees).

Earnings from continuing operations:

Earnings from continuing operations for the fourth quarter ended December 31, 2008, increased 17.0% to $953.3 million, compared with earnings from continuing operations of $815.0 million in the comparable 2007 fiscal period. Adjusted earnings per share from continuing operations, which excludes $111.1 million of intangible asset amortization related to acquisition activity, for the fourth quarter were $0.70, compared with $0.58 in the comparable 2007 fiscal period. GAAP earnings per diluted share from continuing operations for the fourth quarter were $0.65, compared with $0.55 in the comparable 2007 fiscal period. Earnings from continuing operations for the fiscal year ended December 31, 2008, increased 26.8% to $3,344.1 million, compared with earnings from continuing operations of $2,637.0 million in the comparable 2007 fiscal period. Adjusted earnings per share from continuing operations, which excludes $405.0 million of intangible asset amortization related to acquisition activity, for the fiscal year were $2.44, compared with $2.07 in the comparable 2007 fiscal period. GAAP earnings per diluted share from continuing operations for the fiscal year were $2.27, compared with $1.92 in the comparable 2007 fiscal period.

Tom Ryan, Chairman, President and Chief Executive Officer of CVS Caremark said, “I’m really proud of what our team accomplished last year. We made significant strides in solidifying the culture across our enterprise, and our colleagues are working together to take advantage of our strong competitive position. We introduced our Proactive Pharmacy Care offerings, which provide earlier, easier, and more effective pharmacy and health services that improve health outcomes and reduce overall costs for our clients, their plan participants and our customers. In this difficult economic climate and a landscape where control of health care costs is urgently needed, our unique capabilities should prove more valuable than ever.

2008 was a year of very significant accomplishments for CVS Caremark. Across the enterprise our colleagues remained focused on customer service, execution, and expense control. As a result, our overall financial results were excellent for the year, with revenues increasing 15%, same store sales leading the industry, operating margins hitting an all-time record, and Adjusted EPS from continuing operations climbing 20%. We also generated $2 billion in free cash flow for the year,” concluded Mr. Ryan.

Loss from discontinued operations:

In connection with certain business dispositions completed between 1991 and 1997, the Company continues to guarantee store lease obligations for a number of former subsidiaries, including Linens ‘n Things. On May 2, 2008, Linens Holding Co. and certain affiliates, which operate Linens ‘n Things, filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Pursuant to the court order entered on October 16, 2008, Linens Holding Co. is in the process of liquidating the entire Linens ‘n Things retail chain. The Company’s loss from discontinued operations includes $132.0 million of lease-related costs ($214.4 million, net of an $82.4 million income tax benefit), which the Company believes it will likely be required to satisfy pursuant to its Linens ‘n Things lease guarantees.

Earnings from continuing operations:

Earnings from continuing operations for the third quarter ended September 27, 2008, increased 18.8% to $818.8 million compared with earnings from continuing operations of $689.5 million in the comparable 2007 period. Adjusted earnings per share from continuing operations, which excludes $98.2 million in amortization of intangible assets primarily related to acquisition activity, for the third quarter were $0.60, compared with $0.50 in the comparable 2007 period. GAAP earnings per diluted share from continuing operations for the third quarter were $0.56 compared with $0.45 in the comparable 2007 period. Earnings from continuing operations for the nine months ended September 27, 2008, increased 31.2% to $2,390.8 million compared with earnings from continuing operations of $1,822.0 million in the comparable 2007 period. Adjusted earnings per share from continuing operations, which excludes $293.9 million in amortization of intangible assets primarily related to acquisition activity, for the nine months were $1.75, compared with $1.48 in the comparable 2007 period. GAAP earnings per diluted share from continuing operations for the nine months were $1.63 compared with $1.36 in the comparable 2007 period.

Tom Ryan, Chairman, President and Chief Executive Officer of CVS Caremark said, “I’m pleased to report strong third quarter results, which were right in line with our expectations despite the uncertain economic environment. We achieved record sales, operating profits, net earnings, and free cash flow. I’m also pleased to report that we expect to close the acquisition of Longs Drug Stores today, having successfully completed the tender offer. The Longs transaction provides significant upside for both our retail and PBM businesses over time.”

Loss from discontinued operations:

In connection with certain business dispositions completed between 1991 and 1997, we continue to guarantee approximately 220 store lease obligations for a number of former subsidiaries, including Linens ‘n Things. On May 2, 2008, Linens Holding Co., which operates Linens ‘n Things, filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware, leading the Company to correspondingly record an initial estimate of its potential obligations for lease guarantees based on Linens ‘n Things plan of reorganization. On October 14, 2008, it was reported that an auction of Linens ‘n Things was canceled due to lack of qualified bidders and that Linens ‘n Things expected to be liquidated. The loss from discontinued operations includes $131.5 million of lease-related costs ($213.6 million net of a $82.1 million income tax benefit), which the Company believes it will likely be required to satisfy pursuant to the lease guarantees.

Earnings from continuing operations:

Earnings from continuing operations for the second quarter ended June 28, 2008, increased 13.8% to $823.5 million or $0.56 per diluted share on a GAAP basis, compared with earnings from continuing operations of $723.6 million or $0.47 per diluted share in the comparable 2007 period. Adjusted earnings per share from continuing operations, which excludes $97.8 million in amortization of intangible assets primarily related to acquisition activity, for the second quarter were $0.60, compared with $0.51 per share in the comparable 2007 period. Earnings from continuing operations for the six months ended June 28, 2008, increased 38.8% to $1,572.0 million or $1.07 per diluted share on a GAAP basis, compared with earnings from continuing operations of $1,132.5 million or $0.91 per diluted share in the comparable 2007 period. Adjusted earnings per share from continuing operations, which excludes $195.7 million in amortization of intangible assets primarily related to acquisition activity, for the six months were $1.15, compared with $0.99 per share in the comparable 2007 period.

Tom Ryan, Chairman, President and Chief Executive Officer of CVS Caremark said, “This was another quarter of strong financial performance across our businesses. We delivered solid improvement in sales and gross margins and continued to exercise disciplined expense control. That enabled us to hit a record operating profit margin this quarter. At the same time, we’ve further advanced our new PBM/retail model and our clients have expressed growing enthusiasm for our unique new product offerings.”

Loss from discontinued operations:

In connection with business dispositions completed between 1991 and 1997, the Company continues to guarantee store lease obligations for a number of former subsidiaries, including Linens ‘n Things (“Linens”). On May 2, 2008, Linens Holding Co., which operates Linens, filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. As a result, CVS Caremark reported a $48.7 million net loss, or $0.03 per diluted share, from discontinued operations for the thirteen and twenty-six weeks ended June 28, 2008. The net loss from discontinued operations consists of lease-related costs (net of income tax benefit), which the Company may be required to satisfy pursuant to the guarantee of certain Linens’ store lease obligations.