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CVS » Topics » Net revenues increased $8.1 billion during the thirteen weeks ended March 29, 2008 primarily due to the Caremark Merger, which resulted in an increase in Pharmacy Services revenue of $7.9 billion.This excerpt taken from the CVS 10-Q filed May 1, 2008. Net revenues increased $8.1 billion during the thirteen weeks ended March 29, 2008 primarily due to the Caremark Merger, which resulted in an increase in Pharmacy Services revenue of $7.9 billion. Gross profit increased $1.0 billion during the thirteen weeks ended March 29, 2008 due primarily to the Caremark Merger, including benefits resulting from purchasing synergies. In addition, we continued to benefit from the increased utilization of generic drugs (which normally yield a higher gross profit rate than equivalent brand name drugs) in both the Retail Pharmacy and Pharmacy Services segments. However, the increased use of generic drugs has resulted in pressure to decrease reimbursement payments to retail and mail order pharmacies for generic drugs. We expect this trend to continue. Operating expenses increased $356.2 million during the thirteen weeks ended March 29, 2008. Total operating expense increased primarily due to the Caremark Merger, which resulted in incremental operating expenses, depreciation and amortization related to the intangible assets acquired and merger-related integration costs. Interest expense, net consisted of the following:
The increase in interest expense during the thirteen weeks ended March 29, 2008 is due to an increase in our average debt balance, which resulted primarily from the borrowings used to fund the special cash dividend paid to Caremark shareholders and the accelerated share repurchase program that commenced subsequent to the Caremark Merger. Income tax provision ~ Our effective income tax rate was 39.6% for the thirteen weeks ended March 29, 2008, compared to 39.2% for the thirteen weeks ended March 31, 2007. The increase in our effective income tax rate was principally due to the Caremark Merger. Net earnings increased $339.6 million or 83.1% to $748.5 million (or $0.51 per diluted share) for the thirteen weeks ended March 29, 2008, compared to $408.9 million (or $0.43 per diluted share) for the thirteen weeks ended March 31, 2007. The increase in net earnings was primarily due to the impact of the Caremark Merger and strong revenues and improved margin rates in the Retail Pharmacy and Pharmacy Services segments.
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