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Investor Contact: Nancy Christal Media Contact: Wendi Kopsick
Vice President Jim Fingeroth
Investor Relations Kekst and Company
(914) 722-4704 (212) 521-4800
FOR IMMEDIATE RELEASE
CVS REPORTS 1997 SECOND QUARTER EPS OF $.52 PER SHARE, BEFORE ONE-TIME CHARGES,
FOR COMBINED CVS/REVCO - AN INCREASE OF 18.2%
WOONSOCKET, RHODE ISLAND, July 17, 1997 - CVS Corporation (NYSE:CVS) today
reported strong financial results for the second quarter ended June 28, 1997.
All reported financial results reflect the treatment of the Company's recent
acquisition of Revco D.S., Inc. as a pooling of interests. All comparisons to
prior years reflect the inclusion of Revco's results.
SECOND QUARTER
Net sales for the second quarter of 1997 increased 18.2% to $3.2 billion from
sales of $2.7 billion for the second quarter last year. Same store sales,
including CVS' and Revco's results, rose 9.0%. Pharmacy same store sales rose
16.8% for the combined company. Pharmacy sales represented 54% of total sales
for the quarter. Same store sales for CVS alone, rose 8.6% in the second
quarter, while Revco same store sales rose 9.5%.
Operating profit, before consideration of the 1997 Second Quarter One-Time
Charge, increased 17.2% to $180.7 million from $154.2 million in the comparable
period last year, which excludes the 1996 One-Time Charge.
Earnings from continuing operations, excluding the 1997 Second Quarter One-Time
Charge, increased 20.5% to $92.8 million, or $.52 per share, from $77.0
million, or $.44 per share, during the comparable period in 1996 excluding the
1996 One-Time Charge and the TJX Gain. After consideration of the after-tax
impact of the 1997 Second Quarter One-Time Charge, the net loss from continuing
operations was $230.8 million, or $1.37 per share.
During the second quarter of 1997, the Company recorded one-time merger related
charges for the following: 1) $411.7 million pre-tax, $278.6 million after-tax,
or $1.63 per share, for merger fees, employee severance associated with the
closing of Revco's headquarters and exit costs associated with certain store
closings and the Revco headquarters; and 2) $75.0 million pre-tax, $45.0
million after-tax, or $0.26 per share, for inventory markdowns on
non-compatible Revco merchandise. These charges totaling $486.7 million
pre-tax, $323.6 million after-tax, or $1.89 per share, are collectively
referred to as the "1997 Second Quarter One-Time Charge". In addition, the
Company recorded an after-tax charge of $17.1 million, or $.10 per share,
related to the early extinguishment of certain Revco debt assumed as a result
of the merger (the "Extraordinary
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Item"). This charge has been classified as an extraordinary item on the
Company's Consolidated Condensed Statement of Operations.
CVS' total net loss for the second quarter of 1997, including continuing and
discontinued operations, the Extraordinary Item and the after-tax impact of the
1997 Second Quarter One-Time Charge, was $230.5 million, or $1.37 per share,
compared to a net loss of $39.3 million, or $.26 per share, in the second
quarter of 1996 inclusive of the 1996 One-Time Charge, the TJX Gain and the
1996 Restructuring.
SIX MONTHS
For the first six months of 1997, net sales increased 20.8% to $6.3 billion
from sales of $5.2 billion for the same period last year. Same store sales for
the first half of 1997 rose 11.0%, while pharmacy same store sales grew 17.5%.
Pharmacy sales were approximately 52% of total sales for the first six months.
Same store sales increased 11.9% for CVS alone in the first half of 1997 and
10.1% for Revco.
Operating profit, before consideration of the 1997 One-Time Charge, reached
$372.8 million, an increase of 24.6% from $299.3 million for the comparable
period in 1996, which excludes the 1996 One-Time Charge.
Earnings from continuing operations, excluding the 1997 One-Time Charge,
increased 30.2% for the first half of 1997 to $194.0 million, or $1.09 per
share, from $148.9 million, or $.86 per share for the first six months of 1996,
excluding the 1996 One-Time Charge and the TJX Gain. After consideration of the
after-tax impact of the 1997 One-Time Charge, the net loss from continuing
operations for the first six months of 1997 was $148.1 million, or $.91 per
share.
CVS' total net loss for the first six months of 1997, including continuing and
discontinued operations, the Extraordinary Item and the 1997 One-Time Charge,
was $147.7 million, or $.91 per share, compared to net earnings of $6.8 million
in the first half of 1996, which included the 1996 One-Time Charge, the TJX
Gain and the 1996 Restructuring.
CVS Corporation is the nation's largest chain drug store company based on store
count and second based on sales volume. The Company operates approximately
3,900 stores in 24 states and the District of Columbia, in the Northeast,
Mid-Atlantic, Southeast and Midwest.
- Tables Follow -
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CVS CORPORATION
Consolidated Condensed Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
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June 28, June 29, June 28, June 29,
In millions, except per share amounts 1997 1996 1997 1996
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Net sales $3,160.6 $2,674.7 $6,321.5 $5,232.9
Cost of goods sold, buying and
warehousing costs 2,354.2 1,919.7 4,615.0 3,742.0
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Gross margin 806.4 755.0 1,706.5 1,490.9
Selling, general and administrative
expenses 645.9 553.6 1,300.4 1,098.0
Depreciation and amortization 54.8 47.2 108.3 93.7
Non-recurring charge 411.7 12.8 442.7 12.8
- ----------------------------------------------------------------------------------------
Total operating expenses 1,112.4 613.6 1,851.4 1,204.5
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Operating (loss) profit (306.0) 141.4 (144.9) 286.4
Gain on sale of securities -- (76.6) -- (76.6)
Dividend income -- (2.7) -- (5.5)
Interest expense, net 16.5 24.7 29.3 44.3
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Other expense (income), net 16.5 (54.6) 29.3 (37.8)
(Loss) earnings from continuing
operations before income taxes and
extraordinary item (322.5) 196.0 (174.2) 324.2
Income tax (benefit) provision (91.7) 81.8 (26.1) 137.7
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(Loss) earnings from continuing operations
before extraordinary item (230.8) 114.2 (148.1) 186.5
Discontinued operations:
Loss from operations, net of income tax -- (28.8) -- (54.8)
benefits of $13.5 and $17.5 in 1996
Estimated income (loss) on disposal,
net of income tax provisions of $12.4
in 1997 and $69.9 and $70.5 in 1996 17.4 (124.7) 17.5 (124.9)
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Earnings (loss) from discontinued operations 17.4 (153.5) 17.5 (179.7)
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Net (loss) earnings before extraordinary (213.4) (39.3) (130.6) 6.8
item
Extraordinary item, loss related to early (17.1) -- (17.1) --
retirement of debt, net of tax benefit
of $11.4
Net (loss) earnings (230.5) (39.3) (147.7) 6.8
Preferred dividends, net (3.4) (3.6) (6.8) (7.2)
Net (loss) earnings available to common $(233.9) $ (42.9) $(154.5) $ (.4)
shareholders
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PER COMMON SHARE:
(Loss) earnings from continuing
operations $ (1.37) $ .66 $ (.91) $ 1.08
Earnings (loss) from discontinued
operations .10 (.92) .10 (1.08)
Extraordinary item, net of tax (.10) -- (.10) --
- ----------------------------------------------------------------------------------------
Net (loss) earnings $ (1.37) $ (.26) $ (.91) $ --
- ----------------------------------------------------------------------------------------
Weighted average common shares outstanding 167.9 166.2 167.3 164.9
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Dividends declared per common share $ .11 $ .11 $ .22 $ .22
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See accompanying notes to consolidated condensed financial statements.
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CVS CORPORATION
Notes to Consolidated Condensed Statements of Operations
(Unaudited)
Note (1) Revco's cost of sales and inventories have been restated from the
last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO")
method in order to conform the accounting method for the combined
inventories.
Note (2) During the second quarter of 1997, the Company recorded one-time merger
related charges for the following: 1) $411.7 million pre-tax, $278.6
million after-tax, or $1.63 per share, for merger fees, employee
severance associated with the closing of Revco's headquarters and exit
costs associated with certain store closings and the Revco
headquarters; and 2) $75.0 million pre-tax, $45.0 million after-tax, or
$0.26 per share, for inventory markdowns on non-compatible Revco
merchandise. These charges totaling $486.7 million pre-tax, $323.6
million after-tax, or $1.89 per share, are collectively referred to as
the "1997 Second Quarter One-Time Charge". In addition, the Company
recorded an after-tax charge of $17.1 million, or $.10 per share,
related to the early extinguishment of certain Revco debt assumed as a
result of the merger (the "Extraordinary Item"). This charge has been
classified as an extraordinary item on the Company's Consolidated
Condensed Statements of Operations.
Note (3) During the second quarter of 1996, the Company recorded the following
one-time items: 1) a one-time $12.8 million charge pre-tax, $6.5
million after-tax, or $.04 per share, resulting from the failed
acquisition of Revco by Rite Aid (the "1996 One-Time Charge"); 2) a
one-time restructuring charge of $235.0 million pre-tax, $148.0 million
after-tax, or $.89 per share, pertaining to discontinued operations
(the "1996 Restructuring"); and 3) a $44.1 million, or $.27 per share,
after-tax gain from the sale of 1.15 million shares of TJX Companies,
Inc. Series E preferred stock (the "TJX Gain").
Note (4) In addition to the 1997 Second Quarter One-Time Charge, the Company
recorded, in the first quarter of 1997, a $31.0 million pre-tax, $18.6
million after-tax, or $.11 per share, one-time charge relating to the
restructuring of Big B, which was acquired by Revco in November, 1996.
The 1997 Second Quarter One-Time Charge and the one-time charge
relating to the restructuring of Big B are collectively referred to as
the "1997 One-Time Charge".