This excerpt taken from the CVS 8-K filed Feb 2, 2006.
AND FULL YEAR 2005
WOONSOCKET, RHODE ISLAND, February 2, 2006 - CVS Corporation (NYSE: CVS) today announced record sales and earnings for the fourth quarter and fiscal year ended December 31, 2005.
Net earnings for the fourth quarter increased 59.3% to a record $406.4 million or $0.48 per diluted share, compared with net earnings of $255.1 million or $0.30 per diluted share in the fourth quarter of 2004. Net earnings for the full year 2005 increased to a record $1.2 billion, or $1.45 per diluted share, up 31.8% from $1.10 per diluted share reported in 2004. These figures include 7 cents of non-recurring adjustments, which are discussed below. The Company generated more than $650 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 2005, the Company reversed $52.6 million of previously recorded tax reserves through the income tax provision, primarily resulting from finalizing certain state tax matters. The reversal generated a non-cash benefit to diluted earnings per share for the fourth quarter and the full fiscal year of 6 cents. In addition, the fourth quarter and full fiscal year 2005 includes a one-cent benefit to diluted earnings per share, resulting from a litigation settlement.
Net sales for the thirteen-week period ended December 31, 2005 increased 9.1% to a record $9.7 billion, up from $8.9 billion during the thirteen-week period ended January 1, 2005. Same store sales (sales from stores open more than one year) for the quarter rose 6.7%, and were benefited by approximately 149 basis points from the inclusion of approximately 1,100 stores acquired on July 31, 2004. Pharmacy same store sales increased 6.3% and front-end same store sales increased 7.7%. For the full year, total sales for the fifty-two week period ended December 31, 2005, increased 21.0% to a record $37.0 billion, compared to $30.6 billion in 2004. Same store sales for the year increased 6.5%, while pharmacy same store sales increased 7.0% and front-end same store sales increased 5.5%. Total pharmacy sales represented 68.8% and 70.2% of total company sales for the quarter and year respectively. Third party prescription sales were 94.0% of pharmacy sales for the quarter, and 94.1% for the year. Same store sales exclude stores that remain closed as a result of hurricanes Katrina and Rita.
The year 2005 will be remembered as one of considerable accomplishment for our company, stated Tom Ryan, Chairman of the Board, President, and Chief Executive Officer. We completed the integration of approximately 1,100 stores acquired in 2004 and opened nearly 300 new or relocated CVS/pharmacy stores, all while delivering exceptional results in our core business. Our progress on the turnaround of those acquired stores has exceeded our expectations and is adding incremental tailwinds to the overall
Companys sales and profit growth. We reported record sales and earnings results, and our solid free cash flow generation once again demonstrates the quality of our growth. I am very proud of our talented team of associates who worked so diligently to make this a successful year on every front.
Our fourth quarter was no exception, as we delivered record sales and earnings yet again. Our financial performance was driven by strong sales growth in our retail and PBM businesses, solid gross margin improvement, and solid expense control primarily resulting from the increasing usage of generic drugs, commented Mr. Ryan.
As I look to 2006, I am optimistic that we will have another terrific year. We expect to continue to benefit from the turnaround of the stores we acquired in 2004, while delivering consistent, strong growth from our core retail business as well as our PBM business. At mid-year, we expect to complete the recently-announced acquisition of 700 Sav-on and Osco drugstores from Albertsons. That transaction will immediately make us the #1 drugstore in southern California, a fast-growing region where we currently have only 20 stores. It will also strengthen our market shares in other key states, such as Indiana, Missouri, Arizona, and Illinois. The deal will enhance our long-term growth, and is expected to be accretive to earnings and cash flow in its first full year. At the same time, we will continue our organic store growth program, with plans to open 250-275 new or relocated stores throughout 2006. I look forward to reporting on our continued good progress, concluded Mr. Ryan.
For the year, CVS opened 166 new stores, closed 70 stores and relocated 131 others. As of December 31, 2005, CVS operated 5,471 retail and specialty pharmacy stores in 37 states and the District of Columbia.
The Company will be holding a conference call today for the investment community at 8:30am (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 7.9% to $3.0 billion, compared to $2.7 billion in the prior year period. January same store sales rose 5.4%, while pharmacy same store sales increased 4.8% and front-end same store sales increased 6.7%.
CVS is Americas largest retail pharmacy, operating over 5,400 retail and specialty pharmacy stores in 37 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 has created innovative approaches to serve the healthcare needs of all customers through its CVS/pharmacy® stores; its online pharmacy, CVS.com®; 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 press room portion of the Companys website, at www.cvs.com/pressroom.
This press release contains a non-GAAP measure, free cash flow. In accordance with SEC regulations, the Company has provided a reconciliation of free cash flow to its comparable GAAP measure on the investor relations portion of its website, at http://investor.CVS.com.
This press release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. 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 October 1, 2005.