CVS Caremark Corporation (CVS)

Income from Continuing Operations

Income from continuing operations for the third quarter ended September 30, 2009, increased 25.0% to $1.0 billion, compared with income from continuing operations of $818.8 million during the third quarter of 2008. During the third quarter of 2009, the Company recorded approximately $155.7 million, or $0.11 per diluted share, of previously unrecognized tax benefits. These tax benefits are related to the expiration of various statutes of limitation and settlements with tax authorities.

Adjusted earnings per share from continuing operations, which excludes $108.0 million of intangible asset amortization related to acquisition activity, for the third quarter were $0.76 (including the $0.11 per diluted share income tax benefit), compared with $0.60 in the third quarter of 2008. GAAP earnings per diluted share from continuing operations for the third quarter of 2009 were $0.71 (including the $0.11 per diluted share income tax benefit), compared with $0.56 in the third quarter of 2008.

Income from continuing operations for the nine months ended September 30, 2009, increased 11.1% to $2.7 billion, compared with income from continuing operations of $2.4 billion during the nine months ended September 27, 2008. Adjusted earnings per share from continuing operations, which excludes $322.8 million of intangible asset amortization related to acquisition activity, for the nine months ended September 30, 2009, were $1.96 (including the $0.11 per diluted share income tax benefit), compared with $1.75 in the nine months ended September 27, 2008. GAAP earnings per diluted share from continuing operations for the nine months ended September 30, 2009 were $1.82 (including the $0.11 per diluted share income tax benefit), compared with $1.63 in the nine months ended September 27, 2008.

Tom Ryan, Chairman, President, and Chief Executive Officer, said, “I’m very pleased with our performance across the enterprise this quarter. The quarter was characterized by continued industry-leading performance in our retail business, solid performance in our PBM, and record results from MinuteClinic. Our integrated pharmacy care offerings are contributing to results across the company at a growing pace. We achieved solid revenue growth, healthy earnings growth and significant free cash flow. In addition, we recently completed the Longs integration, and the early customer feedback and improvement in financial results are quite positive.”

Dave Rickard, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, said, “Given our continued strong performance year to date, we are narrowing our earnings guidance range for 2009. We expect to deliver adjusted earnings per share from continuing operations, excluding the effect of the tax benefit, of $2.61 to $2.64, up from our previous guidance of $2.59 to $2.64.”

Loss from Discontinued Operations

In connection with certain business dispositions completed between 1991 and 1997, the Company retained guarantees on store lease obligations for a number of former subsidiaries, including Linens ‘n Things. The Company’s loss from discontinued operations for the third quarter and nine months ended September 30, 2009 included $1.8 million ($2.9 million, net of a $1.1 million income tax benefit) and $9.5 million ($15.5 million, net of a $6.0 million income tax benefit) of lease-related costs, respectively. The loss from discontinued operations for the third quarter and nine months ended September 27, 2008 included $82.8 million ($134.8 million, net of a $52.0 million income tax benefit) and $131.5 million ($213.6 million, net of an $82.1 million income tax benefit) of lease-related costs, respectively.