Merger paying off for CVS, 4Q report shows

WOONSOCKET – CVS Caremark Corp. (NYSE: CVS) today announced record earnings and revenue, boosted by the March 22 merger of CVS Corp. and Caremark Rx Inc.
For the 12 months ended Dec. 29, the company posted a 92.6-percent increase in profit to $2.6 billion from the year-ago $1.4 billion. Earnings per diluted share rose to $1.92 from the year-ago $1.60 per share; merger and integration costs pared 5 cents from the 2007 total, the company said.
Total revenue increased 74.2 percent to a record $76.3 billion from $43.8 billion in 2006. Same-store sales in the CVS/pharmacy division increased 5.3 percent for the year, with front-end sales rising 5.3 percent as pharmacy sales rose 5.2 percent.
“2007 was a milestone year for CVS Caremark, and we accomplished a great deal across our business units,” Thomas M. Ryan, the company’s chairman, president and CEO, said in a statement. “At the same time, we remained focused on service, execution and expense control,” he added.
“We attained our goal of generating $2 billion in free cash flow, and launched a $5 billion share repurchase program, slated to be fully complete by the end of the first quarter of this year,” Ryan said.
“We also set the stage for significant future growth, with the completion of our transformational merger. From this platform, we are creating a unique and differentiated position in the marketplace, which will enable us to reduce the costs and complexities of healthcare for payors and consumers, while improving health outcomes.”
For the fourth quarter, CVS Caremark posted a 95.3-percent increase in profit to $815.0 million, and a 6-cent increase in diluted earnings to 55 cents per share. Merger costs in the period amounted to 1 cent per share.
Shares rose on the news, which matched the 55-cent-per share forecast from a survey of 18 analysts by Bloomberg News.
Fourth-quarter revenue increased 81.0 percent to $21.9 billion. CVS/pharmacy same-store sale increased 3.4 percent compared with the 2006 fourth quarter; pharmacy same-store sales rose 3.5 percent despite the 450 basis-point impact of recent generic-drug introductions, while front-end sales rose 2.9 percent.
During the year, CVS Caremark opened 139 new retail pharmacies and one specialty pharmacy; closed 44 retail pharmacies, one mail-service pharmacy and two mail-order specialty pharmacies; and relocated 136 retail pharmacy stores and one specialty pharmacy. That left the company with 6,245 retail pharmacy stores, 56 specialty pharmacy stores, 20 specialty mail order pharmacies and nine mail order pharmacies – in 44 states and the District of Columbia – as of Dec. 29.
“It’s a comfortable place to be, with a nice mix of health care and retail,” Richard Sichel, who helps manage about $1.5 billion, including CVS shares, as chief investment officer of Philadelphia Trust Co. , told Bloomberg News. “We think they have a lot going for them.”
CVS Caremark Corp. (NYSE: CVS) operates the CVS/pharmacy stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. Additional information is available at investor.cvs.com.