May 8, 2007 7:47 a.m. EDT
DOW JONES REPRINTS
CVS/Caremark Posts
24% Rise in Net Income
By MIKE BARRIS
May 8, 2007 7:47 a.m.
CVS/Caremark Corp., formed from the merger of drugstore chain CVS Corp. and
pharmacy-benefits manager Caremark Rx Inc., Tuesday posted a 24% rise in first-quarter
net income, as revenue rose 32%.
The Woonsocket, R.I., company said net income for the quarter ended March 31, which
include 10 days of Caremark's operations, was $408.9 million, or 43 cents a share. Net
income was $329.6 million, or 39 cents a share, a year earlier. The latest quarter includes
merger costs of three cents a share.
Analysts polled by Thomson Financial expected CVS/Caremark to post earnings,
excluding items, of 45 cents a share.
Net revenue rose to $13.19 billion from $9.98 billion. Same-store sales, or sales at stores
open at least a year, rose 7.5%. Pharmacy same-store sales rose 7.8%.
President and Chief Executive Tom Ryan called the combined company's first quarter
"very solid." "The underlying performance in our retail business was driven by healthy
sales growth in the pharmacy and front end of our stores, solid expense control, and
continued improvements in margin," Mr. Ryan said. "The increasing usage of generic
drugs and our successful front end strategies are both driving higher margins at CVS."
Caremark's results also were solid, he said.
CVS/Caremark is the nation's largest retail pharmacy, but trails rival Walgreen Co. in
total sales.
CVS/Caremark also provided a separate earnings statement for Caremark as a stand-
alone operation. The company said Caremark's operating profit, excluding charges, rose
to $460.3 million, from $367.3 million. Net revenue gained 5.9% to $9.44 billion from
$8.91 billion.
In March, CVS said it expected a combined CVS/Caremark to generate more than $3
billion in free cash flow and add eight cents to 10 cents to earnings per share in 2008. For
2009, CVS said it expects the combined company to have free cash of more than $3.5
billion and to add 14 cents to 18 cents to earnings per share.
The results come amid an investors' campaign to oust two CVS/Caremark directors at the
annual meeting Wednesday for their failure to exact a higher price from CVS when the
drugstore chain agreed to acquire Caremark. Caremark's shareholders approved a $27
billion takeover bid by CVS in March, but only after CVS was forced to sweeten its
initial offer several times amid shareholders' protests. Investors came out against the
merger after Nashville, Tenn.-based Caremark's board rejected a competing bid from
Express Scripts Inc. that was initially higher than the CVS offer.
Write to Mike Barris at mike.barris@dowjones.com1