Investor Contact: Nancy Christal Media Contact: Todd Andrews
Vice President Director
Investor Relations Corporate Communications
(914) 722-4704 (401) 770-5717
FOR IMMEDIATE RELEASE
CVS CORPORATION ANNOUNCES STATUS OF EXCHANGE OFFER FOR ITS 5 1/2% NOTES;
AGREES TO ADJUST TIMING OF CERTAIN MERGER-RELATED CHARGES
WOONSOCKET, RHODE ISLAND, November 15, 1999 - CVS Corporation (NYSE: CVS)
today announced that it has resolved all substantive matters relating to the
Securities and Exchange Commission's review of the registration statement for
its offer to exchange all of its existing 5 1/2% Notes due February 15, 2004
for new 5 1/2% Exchange Notes due February 15, 2004, and expects shortly to
launch the exchange offer. The Exchange Notes will be identical in all
material respects to the existing Notes, except that the Exchange Notes will
be registered with the SEC and will not be subject to the transfer
restrictions and registration rights that applied to the existing Notes.
CVS sold the existing Notes in February 1999 to institutional investors in a
private placement that was exempt from registration under the Securities Act
of 1933. In connection with that sale, CVS agreed to file a registration
statement with the Securities and Exchange Commission with respect to the
exchange offer. As part of the review process for that registration statement,
the SEC has conducted a full review of the periodic reports that CVS
previously filed with the SEC, including its most recent Annual Report on Form
10-K, its most recent Quarterly Reports on Form 10-Q and its historical
consolidated financial statements.
In connection with concluding that review, CVS has agreed with the SEC to
restate its consolidated financial statements for 1997 and 1998 to adjust the
timing of certain merger-related charges. As a result of these adjustments,
earnings from continuing operations, including merger, restructuring and other
non-recurring charges, increased by $11.9 million (or $0.03 per diluted common
share) in 1997 and decreased by $11.9 million (or $0.03 per diluted common
share) in 1998. Earnings from continuing operations before the impact of
merger, restructuring and other non-recurring charges was not affected in any
fiscal quarter or year.
"The modest adjustments simply move merger-related charges between quarters in
1997 and 1998, with no change in the total amount of the charges or the
results for the two years when viewed together. Certainly, they have no effect
on 1999 or future period results. I would not expect any investors or analysts
to change their company models as a result of this announcement," stated Dave
Rickard, Executive Vice President and Chief Financial Officer.
Specifically, the adjustments include the following:
o In connection with the merger of CVS and Revco, CVS recorded a $39.6
million pre-tax ($23.4 million after-tax) charge in the second quarter of
1997, which represented the estimated non-recurring costs that would be
incurred in connection with eliminating the duplicate Revco information
technology systems. As reflected in the attached tables, CVS agreed to
restate 1997 to record a charge for these non-recurring costs in the
fiscal quarters in which the costs were incurred.
o Also in connection with the merger of CVS and Revco, CVS recorded a $35.0
million pre-tax ($20.5 million after-tax) charge, which represented the
estimated non-recurring costs that would be incurred in connection with
removing non-compatible merchandise fixtures from approximately 2,200
Revco stores. As reflected in the attached tables, CVS agreed to restate
1997 and 1998 to record a charge for these non-recurring costs in the
fiscal quarters in which the costs were incurred.
o In connection with the merger of CVS and Arbor, CVS recorded an $11
million pre-tax ($6.5 million after-tax) charge in the second quarter of
1998, which represented the estimated non-recurring costs that would be
incurred in connection with eliminating the duplicate Arbor information
technology systems. As reflected
in the attached tables, CVS agreed to restate 1998 to record a charge for
these non-recurring costs in the fiscal quarters in which the costs were
incurred.
A registration statement relating to the Exchange Notes has been filed with
the SEC but has not yet become effective. The Exchange Notes may not be sold
nor may offers to buy be accepted prior to the time the registration statement
is declared effective. This press release shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of the
Exchange Notes in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
This press release is not an offer to exchange existing Notes for Exchange
Notes, which we will be making only through a prospectus. Copies of the
prospectus and related documents will be obtainable from The Bank of New York,
as exchange agent, 101 Barclay Street, New York, New York 10286, attention:
Jennifer Pedi.
CVS is the largest retail provider of prescriptions in the nation.
The Company is the No. 1 drugstore chain in the U.S. with stores in the
Northeast, Mid-Atlantic, Southeast and Midwest regions of the country. General
information about CVS, including corporate background and press releases, is
available through CVS' website at http://www.CVS.com.
-Attachments Follow-
Attachment 1
CVS Corporation
Consolidated Statements of Operations
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Years Ended December 31,
1998 1997
------------------------------ ------------------------------
As As Previously As As Previously
In millions, except per share amounts Restated Reported Restated Reported
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Net sales $ 15,273.6 $ 15,273.6 $ 13,749.6 $ 13,749.6
Cost of goods sold, buying and warehousing costs 11,144.4 11,144.4 10,031.3 10,031.3
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Gross margin 4,129.2 4,129.2 3,718.3 3,718.3
Selling, general and administrative expenses 2,949.0 2,949.0 2,776.0 2,776.0
Depreciation and amortization 249.7 249.7 238.2 238.2
Merger, restructuring and other non-recurring charges 178.6 158.3 422.4 442.7
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Total operating expenses 3,377.3 3,357.0 3,436.6 3,456.9
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Operating profit 751.9 772.2 281.7 261.4
Interest expense, net 60.9 60.9 44.1 44.1
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Earnings from continuing operations before income taxes
and extraordinary item 691.0 711.3 237.6 217.3
Income tax provision (306.5) (314.9) (149.2) (140.8)
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Earnings from continuing operations before extraordinary item 384.5 396.4 88.4 76.5
Discontinued operations, net of tax provision of $12.4 -- -- 17.5 17.5
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Earnings before extraordinary item -- -- 105.9 94.0
Extraordinary item, loss related to early retirement of debt,
net of tax benefit of $11.4 -- -- (17.1) (17.1)
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Net earnings $ 384.5 $ 396.4 $ 88.8 $ 76.9
Preference dividends, net of income tax benefit (13.6) (13.6) (13.7) (13.7)
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Net earnings available to common shareholders $ 370.9 $ 382.8 $ 75.1 $ 63.2
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Basic earnings per common share:
Earnings from continuing operations before extraordinary item $ 0.96 $ 0.99 $ 0.20 $ 0.17
Earnings from discontinued operations -- -- 0.05 0.05
Extraordinary loss, net of tax benefit -- -- (0.05) (0.05)
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Net earnings $ 0.96 $ 0.99 $ 0.20 $ 0.17
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Weighted average basic common shares outstanding 387.1 387.1 377.2 377.2
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Diluted earnings per common share:
Earnings from continuing operations before extraordinary item $ 0.95 $ 0.98 $ 0.19 $ 0.16
Earnings from discontinued operations -- -- 0.05 0.05
Extraordinary loss, net of tax benefit -- -- (0.05) (0.05)
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Net earnings $ 0.95 $ 0.98 $ 0.19 0.16
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Weighted average diluted common shares outstanding 405.2 405.2 385.1 385.1
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Dividends per common share $ 0.225 $ 0.225 $ 0.220 $ 0.220
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Attachment 2 (Page 1 of 2)
CVS Corporation
Consolidated Statements of Operations
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1998
----------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
----------------------- ----------------------- ---------------------- ----------------------
As As As As
In millions, except per share As Previously As Previously As Previously As Previously
amounts Restated Reported Restated Reported Restated Reported Restated Reported
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Net sales $3,601.5 $3,601.5 $3,755.9 $3,755.9 $3,725.1 $3,725.1 $4,191.1 $4,191.1
Gross margin 1,006.9 1,006.9 1,020.5 1,020.5 $ 995.3 $ 995.3 $1,106.5 $1,106.5
Selling, general & administrative 704.2 704.2 726.4 726.4 742.9 742.9 775.5 775.5
Depreciation and amortization 63.8 63.8 61.2 61.2 60.7 60.7 64.0 64.0
Merger, restructuring and other
non-recurring charges 5.1 -- 161.0 158.3 10.6 -- 1.9 --
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Total operating expenses 773.1 768.0 948.6 945.9 814.2 803.6 841.4 839.5
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Operating profit 233.8 238.9 71.9 74.6 181.1 191.7 265.1 267.0
Interest expense, net 11.2 11.2 18.9 18.9 15.1 15.1 15.7 15.7
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Earnings before income taxes 222.6 227.7 53.0 55.7 166.0 176.6 249.4 251.3
Income tax provision 93.6 95.7 38.4 39.5 69.8 74.2 104.7 105.5
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Net earnings $ 129.0 $ 132.0 $ 14.6 $ 16.2 $ 96.2 $ 102.4 $ 144.7 $ 145.8
Preference dividends, net of
income tax benefit (3.4) (3.4) (3.4) (3.4) (3.4) (3.4) (3.4) (3.4)
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Net earnings available to common
shareholders $ 125.6 $ 128.6 $ 11.2 $ 12.8 $ 92.8 $ 99.0 $ 141.3 $ 142.4
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Basic earnings per common share:
Net earnings $ 0.33 $ 0.34 $ 0.03 $ 0.03 $ 0.24 $ 0.25 $ 0.36 $ 0.37
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Weighted average basic common
shares outstanding 382.9 382.9 385.8 385.8 389.5 389.5 390.1 390.1
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Diluted earnings per common share:
Net earnings $ 0.32 $ 0.33 $ 0.03 $ 0.03 $ 0.23 $ 0.25 $ 0.36 $ 0.36
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Weighted average diluted common
shares outstanding 400.9 400.9 394.6 394.6 396.1 396.1 407.5 407.5
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Dividends per common share $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0575 $ 0.0575 $ 0.0575 $ 0.0575
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Attachment 2 (Page 2 of 2)
CVS Corporation
Consolidated Statements of Operations
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1997
--------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------- ---------------------- ---------------------- ----------------------
As As As As
In millions, except per share As Previously As Previously As Previously As Previously
amounts Restated Reported Restated Reported Restated Reported Restated Reported
---------------------------------------------------------------------------------------------------------------------------------
Net sales $3,397.8 $3,397.8 $3,406.8 $3,406.8 $3,328.7 $3,328.7 $3,616.3 $3,616.3
Gross margin 967.9 967.9 873.0 873.0 $ 905.6 $ 905.6 $ 971.8 $ 971.8
Selling, general & administrative 703.3 703.3 693.7 693.7 688.6 688.6 690.4 690.4
Depreciation and amortization 57.7 57.7 58.7 58.7 63.5 63.5 58.3 58.3
Merger, restructuring and other
non-recurring charges 31.0 31.0 350.3 411.7 15.1 -- 26.0 --
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Total operating expenses 792.0 792.0 1,102.7 1,164.1 767.2 752.1 774.7 748.7
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Operating profit (loss) 175.9 175.9 (229.7) (291.1) 138.4 153.5 197.1 223.1
Interest expense, net 12.9 12.9 16.2 16.2 9.2 9.2 5.8 5.8
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Earnings (loss) from continuing
operations before income taxes and
extraordinary item 163.0 163.0 (245.9) (307.3) 129.2 144.3 191.3 217.3
Income tax provision (benefit) 70.9 70.9 (60.5) (85.9) 55.9 62.1 82.9 93.7
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Earnings (loss) from continuing
operations before extraordinary item 92.1 92.1 (185.4) (221.4) 73.3 82.2 108.4 123.6
Discontinued operations, net of
tax provision 0.1 0.1 17.4 17.4 -- -- -- --
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Earnings before extraordinary item 92.2 92.2 (168.0) (204.0) 73.3 82.2 108.4 123.6
Extraordinary loss, net of tax
benefit -- -- (17.1) (17.1) -- -- -- --
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Net earnings (loss) $ 92.2 $ 92.2 $ (185.1) $ (221.1) $ 73.3 $ 82.2 $ 108.4 $ 123.6
Preference dividends, net of income
tax benefit (3.5) (3.5) (3.4) (3.4) (3.4) (3.4) (3.4) (3.4)
---------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) available to
common shareholders $ 88.7 $ 88.7 $ (188.5) $ (224.5) $ 69.9 $ 78.8 $ 105.0 $ 120.2
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Basic earnings per common share:
Earnings (loss) from continuing
operations before extraordinary
item $ 0.24 $ 0.24 $ (0.51) $ (0.60) $ 0.18 $ 0.21 $ 0.27 $ 0.31
Earnings from discontinued
operations -- -- 0.05 0.05 -- -- -- --
Extraordinary loss, net of tax
benefit -- -- (0.05) (0.05) -- -- -- --
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Net earnings (loss) $ 0.24 $ 0.24 $ (0.51) $ (0.60) $ 0.18 $ 0.21 $ 0.27 $ 0.31
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Weighted average basic common
shares outstanding 370.6 370.6 373.9 373.9 381.7 381.7 382.3 382.3
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Diluted earnings per common share:
Earnings (loss) from continuing
operations before extraordinary
item $ 0.23 $ 0.23 $ (0.51) $ (0.60) $ 0.18 $ 0.20 $ 0.27 $ 0.31
Earnings from discontinued
operations -- -- 0.05 0.05 -- -- -- --
Extraordinary loss, net of tax
benefit -- -- (0.05) (0.05) -- -- -- --
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Net earnings (loss) $ 0.23 $ 0.23 $ (0.51) $ (0.60) $ 0.18 $ 0.20 $ 0.27 $ 0.31
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Weighted average diluted common
shares outstanding 377.4 377.4 373.9 373.9 388.0 388.0 399.6 399.6
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Dividends per common share $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0550 $ 0.0550
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Attachment 3
Following is a summary of the effect of the restatement adjustments discussed in the attached press release on CVS'
previously reported diluted earnings per common share from continuing operations for 1997 and 1998.
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First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
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1997:
Diluted earnings per common share,
as previously reported $ 0.23 $ (0.60) $ 0.20 $ 0.31 $ 0.16
Restatement adjustments:
Duplicate Revco information
technology systems elimination costs -- 0.04 (0.01) (0.03) --
Non-compatible Revco store
merchandise fixture removal costs -- 0.05 (0.01) (0.01) 0.03
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Diluted earnings per common share,
as restated $ 0.23 $ (0.51) $ 0.18 $ 0.27 $ 0.19
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1998:
Diluted earnings per common share,
as previously reported $ 0.33 $ 0.03 $ 0.25 $ 0.36 $ 0.98
Restatement adjustments:
Duplicate Arbor information
technology systems elimination costs -- 0.01 (0.01) -- --
Non-compatible Revco store
merchandise fixture removal costs (0.01) (0.01) (0.01) -- (0.03)
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Diluted earnings per common share,
as restated $ 0.32 $ 0.03 $ 0.23 $ 0.36 $ 0.95
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