CVS Corporation Reports Record Sales And Earnings In 1997

Monday, February 9, 1998

Reports Diluted EPS From Continuing Operations Of $0.61 In The Fourth Quarter And $2.12 For The Year

WOONSOCKET, RHODE ISLAND, February 9, 1998 - CVS Corporation (NYSE: CVS) today announced record sales and earnings from continuing operations, excluding merger, restructuring and other non-recurring charges,for the fourth quarter and full year ended December 31, 1997. All financial results reflect the merger of CVS and Revco D.S., Inc., which was accounted for as a pooling of interests.

Net sales for the fourth quarter were $3.3 billion, up 8.5% from $3.1 billion during the same period last year, which reflects the impact of closed and divested stores. For the full year, net sales increased 16.4% to $12.7 billion, up from $10.9 billion in 1996. Same store sales rose 7.1% for the quarter and 9.8% for the year, while pharmacy same store sales increased 14.6% for the quarter and 16.7% for the year. Pharmacy sales were approximately 54% of total sales for both the quarter and year.

For the fourth quarter, comparable earnings from continuing operations, excluding the effect of the gain on sale of securities in 1996, increased 35.1% to $110.8 million, or $0.61 per diluted share, from $82.0 million, or $0.46 per diluted share, during the same period last year.

For the full year, comparable earnings from continuing operations, excluding the effect of the non-recurring charges and the gain on sale of securities in 1996 and 1997, increased 38.1% to $380.1 million, or $2.12 per diluted share in 1997, from $275.2 million, or $1.55 per diluted share in 1996. Including the effect of the non-recurring charges and the gain on sale of securities, earnings from continuing operations were $37.3 million, or $0.14 per diluted share in 1997, compared to $340.8 million, or $1.92 per diluted share in 1996.

"These results reflect an excellent fourth quarter and an outstanding year for CVS," said CVS/Pharmacy President and CEO Tom Ryan. "We are especially pleased with the fourth quarter results, which highlight not only the continued strength of the core CVS business, but also the improvement starting to be seen in Revco's performance." Mr. Ryan continued, "1997's record performance resulted from continued strength in both our front end and pharmacy businesses, significant cost reductions realized from both technology investments and merger synergies and our aggressive store development program, which included 287 new and relocated stores in 1997."

"We are also extremely pleased with the significant progress made to date on the Revco integration. By mid-February, we will have completely converted all front store and pharmacy systems in the Revco stores, concluding the migration of Revco to all CVS systems. This eliminates a significant risk in the integration of Revco. By the end of March, we will have also completely closed Revco's headquarters and finished a majority of the re-planogramming to reflect the CVS merchandising mix. The final step of remodeling the stores remains on schedule to be completed at the end of this year. Moreover, all of this was accomplished without losing our focus on the core business and most importantly, the customer." Mr. Ryan added, "Furthermore, positive progress with the integration of Revco bodes well for strong sales growth in 1998."

During the fourth quarter, the Company was required to retroactively adopt Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This statement requires companies with complex capital structures to present basic and diluted earnings per share in lieu of previously reported primary and fully diluted earnings per share. The implementation of SFAS No. 128 had the following effect on the Company's earnings per share from continuing operations, excluding the non-recurring charges in 1996 and 1997, and the gain on sale of securities in 1996:

Fourth Quarter

Full Year

1997

1996

1997

1996

Basic* $0.62 $0.47 $2.16 $1.58
Primary 0.62 0.47 2.12 1.57
Net change $0.00 $0.00 $0.04 $0.01
Diluted* $0.61 $0.46 $2.12 $1.55
Fully diluted 0.61 0.46 2.12 1.55
Net change $0.00 $0.00 $0.00 $0.00

 

*As calculated under SFAS No. 128

Net earnings for the fourth quarter, including discontinued operations and the gain on sale of securities in 1996, were $110.8 million, or $0.61 per diluted share in 1997, compared to $90.3 million, or $0.51 per diluted share in 1996. Including the effect of the discontinued operations, the extraordinary item, the non-recurring charges and the gain on sale of securities, net earnings for the year were $37.7 million, or $0.14 per diluted share in 1997, compared to $176.6 million, or $0.98 per diluted share in 1996.

CVS, which operated 3,888 stores, as of December 31, 1997, in 24 states and the District of Columbia, is the leading drug store chain in the Northeast, Mid-Atlantic, Southeast and Midwest.

General information about CVS, including corporate background and press releases, is available thorough CVS' web site at http://www.CVS.com.

This press release contains certain forward-looking statements that are subject to risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's Securities and Exchange Commission filings.





CVS Corporation
Consolidated Statements of Operations
(Unaudited)

 

Three Months Ended

Year Ended

In millions, except per share amounts

December 31, 1997

December 31, 1996

December 31, 1997

December 31, 1996

Net sales
Cost of goods sold, buying and warehousing costs
$3,336.5
2,442.8
$3,073.8
2,239.7
$12,738.2
9,298.5
$10,944.8
7,892.7
Gross margin
Selling, general and administrative expenses
Depreciation and amortization
Merger, restructuring and other non-recurring charges
893.7
636.4
54.2
--
834.1
628.1
47.5
--
3,439.7
2,575.4
221.8
442.7
3,052.1
2,309.7
188.8
12.8
Total operating expenses 690.6 675.6 3,239.9 2,511.3
Operating profit
Gain on sale of securities
Dividend income
Interest expense, net
203.1
--
--
(6.0)
158.5
19.3
--
(15.0)
199.8
--
--
(44.8)
540.8
121.4
5.6
(75.7)
Other (expense) income, net (6.0) 4.3 (44.8) 51.3
Earnings from continuing operations before income taxes and extraordinary item
Income tax provision
197.1

86.3

162.8

69.3

155.0

117.7

592.1

251.3

Earnings from continuing operations before extraordinary item
Discontinued operations:
Loss from operations, net of income tax
 benefit of $31.0 in 1996
(Loss) income on disposal, net of income tax (provision) benefit of $(12.4) in 1997 and $0.9 and $56.2 in 1996
110.8

--

--

93.5

--

(3.2)

37.3

--

17.5

340.8

(54.8)

(109.4)

(Loss) earnings from discontinued operations

--

(3.2) 17.5 (164.2)
Net earnings before extraordinary item
Extraordinary item, loss related to early retirement of debt, net of tax benefit of $11.4
110.8
--
90.3
--
54.8
(17.1)
176.6
--
Net earnings
Preferred dividends, net
110.8
(3.4)
90.3
(3.6)
37.7
(13.7)
176.6
(14.5)
Net earnings available to common shareholders $107.4 $86.7 $24.0 $162.1
Basic earnings per common share:
Earnings from continuing operations before extraordinary item
(Loss) earnings from discontinued operations
Extraordinary item, net of tax
$0.62

--
--

$0.54

(0.02) 
--

$0.14

0.10
(0.10)

$1.97

(0.99)
--

Net earnings $0.62 $0.52 $0.14 $0.98
Weighted average basic common shares outstanding 172.3 166.1 169.8 165.3
Diluted earnings per common share:
Earnings from continuing operations before extraordinary item
(Loss) earnings from discontinued operations
Extraordinary item, net of tax
$0.61

--
--

$0.53

(0.02) 
--

$0.14

0.10
(0.10)

$1.92

(0.95)
--

Net earnings $0.61 $0.51 $0.14 $0.98
Weighted average diluted common shares outstanding 180.0 173.9 173.0 173.2
Dividends declared per common share $0.11 $0.11 $0.44 $0.44