<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the Quarterly Period Ended Commission File Number
March 29, 1997 1-1011
CVS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 05-0494040
(State of Incorporation) (I.R.S. Employer Identification Number)
One CVS Drive, Woonsocket, Rhode Island 02865
(Address of principal executive offices)
Telephone: (401) 765-1500
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Common Stock, $.01 par value, outstanding at May 6,1997:
107,594,383 shares
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INDEX
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PART I PAGE
Item 1. Financial Statements
Consolidated Condensed Statements of Operations -
Three Months Ended March 29, 1997 and March 30, 1996 3
Consolidated Condensed Balance Sheets -
As of March 29, 1997 and December 31, 1996 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 29, 1997 and March 30, 1996 5
Notes to Consolidated Condensed Financial Statements 6
Independent Auditors' Review Report 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II
Item 6. Exhibits and Reports on Form 8-K 12
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2
<PAGE> 3
<TABLE>
Part I Item 1
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CVS CORPORATION
Consolidated Condensed Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
MARCH 29, March 30,
In millions, except per share amounts 1997 1996
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<S> <C> <C>
Net sales $1,515.0 $1,258.4
Cost of goods sold, buying and warehousing costs 1,083.7 896.4
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Gross margin 431.3 362.0
Selling, general and administrative expenses 316.9 270.8
Depreciation and amortization 19.8 19.8
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Total operating expenses 336.7 290.6
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Operating profit 94.6 71.4
Dividend income -- 2.8
Interest income (expense), net 4.4 (5.6)
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Other income (expense), net 4.4 (2.8)
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Earnings from continuing operations before income taxes 99.0 68.6
Income tax provision (40.6) (28.0)
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Earnings from continuing operations 58.4 40.6
Discontinued operations:
Loss from operations, net of income tax benefit
of $17.6 in 1996 -- (26.1)
Estimated gain (loss) on disposal, net of
income tax benefit of $.6 and minority interest
in net earnings of $.2 in 1996 .1 (.3)
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Earnings (loss) from discontinued operations .1 (26.4)
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Net earnings 58.5 14.2
Preferred dividends, net (3.6) (3.5)
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Net earnings available to common shareholders $ 54.9 $ 10.7
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PER COMMON SHARE:
Earnings from continuing operations $ .51 $ .35
Earnings (loss) from discontinued operations -- (.25)
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Net earnings $ .51 $ .10
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Weighted average common shares outstanding 106.9 105.2
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Dividends per common share $ .11 $ .11
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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3
<PAGE> 4
<TABLE>
Part I Item 1
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CVS CORPORATION
Consolidated Condensed Balance Sheets
<CAPTION>
MARCH 29,
1997 December 31,
In millions, except per share amounts (UNAUDITED) 1996
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<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 334.6 $ 423.9
Investments 179.5 179.4
Accounts receivable, net 163.8 160.8
Inventories 1,053.8 1,031.4
Prepaid expenses 169.9 177.2
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TOTAL CURRENT ASSETS 1,901.6 1,972.7
Property and equipment, net 605.9 606.5
Deferred charges and other assets 131.3 131.9
Goodwill, net 119.8 120.7
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TOTAL ASSETS $2,758.6 $2,831.8
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LIABILITIES:
Accounts payable $ 421.5 $ 507.7
Accrued expenses 592.8 639.9
Federal income taxes 12.2 16.1
Other current liabilities 18.2 18.2
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TOTAL CURRENT LIABILITIES 1,044.7 1,181.9
Long-term debt 294.0 303.7
Deferred income taxes 22.0 20.6
Other long-term liabilities 85.4 80.5
SHAREHOLDERS' EQUITY:
Preference stock; par value $1.00, 50 shares
authorized; Series One ESOP Convertible,
liquidation value $53.45; 5.5 and 5.6
shares issued and outstanding at March 29,
1997 and December 31, 1996, respectively 296.3 298.6
Common stock; par value $.01, 300 shares
authorized, 113.1 and 112.4 shares issued
at March 29, 1997 and December 31, 1996,
respectively 1.1 1.1
Treasury stock at cost; 5.8 and 5.8 shares at
March 29, 1997 and December 31, 1996,
respectively (271.2) (273.2)
Guaranteed ESOP obligation (292.1) (292.1)
Capital surplus 220.1 199.1
Retained earnings 1,360.7 1,314.0
Other (2.4) (2.4)
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TOTAL SHAREHOLDERS' EQUITY 1,312.5 1,245.1
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,758.6 $2,831.8
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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4
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<TABLE>
Part I Item 1
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CVS CORPORATION
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended
MARCH 29, March 30,
In millions 1997 1996
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<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $(13.1) $(268.7)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (19.4) (49.0)
Proceeds from sale or disposal of assets 2.2 13.3
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NET CASH USED IN INVESTING ACTIVITIES (17.2) (35.7)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable -- 448.0
Decrease in book overdrafts (58.2) (171.7)
Dividends paid (11.7) (11.6)
Proceeds from stock options exercised 20.7 --
Decrease in long-term debt and obligations under
capital leases (9.8) (.4)
Other, net -- .5
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (59.0) 264.8
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Net decrease in cash and cash equivalents (89.3) (39.6)
Cash and cash equivalents at beginning of period 423.9 129.6
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $334.6 $ 90.0
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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5
<PAGE> 6
Part I Item 1
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CVS CORPORATION
Notes to Consolidated Condensed Financial Statements
(Unaudited)
NOTE 1
The accompanying consolidated condensed financial statements have been prepared
without audit, in accordance with the rules of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996.
In the opinion of management, the accompanying consolidated condensed financial
statements include all adjustments (consisting only of normal recurring
adjustments) which are necessary to present a fair statement of the results for
the interim periods presented. Because of the influence of certain holidays,
seasonal and other factors on the Company's operations, net earnings for any
interim period may not be comparable to the same interim period in previous
years, nor necessarily indicative of earnings for the full year.
NOTE 2
On February 6, 1997, CVS Corporation ("CVS" or the "Company") signed a
definitive merger agreement to acquire Revco D.S., Inc. ("Revco") in a stock
for stock merger valued at approximately $2.8 billion. CVS will also assume
approximately $900 million of existing Revco debt as part of this transaction.
Under the terms of the merger agreement, CVS will combine with Revco in an
exchange of stock that is expected to qualify for treatment as a pooling of
interests transaction, tax free to Revco shareholders. If the merger is
completed, for each share of Revco common stock held, Revco shareholders will
receive the sum of (i) 0.4692 shares of CVS common stock and (ii) the number of
shares of CVS common stock equal to the quotient obtained by dividing $20 by the
average closing price of CVS common stock during ten trading days randomly
selected out of the twenty trading days ending on the fifth trading day
preceding the closing date (collectively, the "Exchange Ratio"), provided that,
under no circumstances will the Exchange Ratio exceed 1.0097 or be less than
0.8837.
The transaction is subject to approval by the shareholders of both companies,
expiration of the applicable waiting period under the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended, and certain other customary
closing conditions. If all the closing conditions have been met, it is expected
that the transaction will be completed by mid-year 1997.
On March 21, 1997, CVS and Revco received a request for additional information
from the Federal Trade Commission relating to CVS' proposed acquisition of
Revco.
NOTE 3
Discontinued operations accounted for approximately 5.9% and 5.0 % of total
assets and approximately 4.2% and 3.8% of total liabilities at March 29, 1997
and December 31, 1996 respectively. Net sales from discontinued operations
totaled $71.2 million and $862.0 million for the three months ended March 29,
1997 and March 30, 1996, respectively.
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6
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Part I Item 1
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CVS CORPORATION
Notes to Consolidated Condensed Financial Statements
(Unaudited)
NOTE 4
Primary earnings per share is computed by dividing (i) net earnings, after
deducting net dividends on redeemable preferred stock and ESOP Preference Stock
("Primary Earnings"), by (ii) the weighted average number of common shares
outstanding during the period assuming the exercise of stock options ("Primary
Shares").
Fully diluted earnings per share assumes that the ESOP preference stock is
converted into common stock. Fully diluted earnings per share is computed by
dividing (i) Primary Earnings, after accounting for the difference between the
current dividends on the ESOP preference stock and the common stock and after
making adjustments for certain non-discretionary expenses that are based on net
earnings such as incentive bonuses and profit sharing by (ii) Primary Shares
plus the number of additional common shares that would be issued upon the
conversion of the ESOP preference stock. Fully diluted earnings per share
presentation is not required on the face of the consolidated statements of
operations due to the results of the materiality tests mandated by Accounting
Principles Board Opinion No. 15, "Earnings Per Share."
The Company plans to adopt Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share" during the fourth quarter of 1997. SFAS No. 128
was issued in February 1997 and is effective for periods ending after December
15, 1997. This standard requires the dual presentation of basic and diluted
earnings per share on the face of the income statement for all entities with
complex capital structures. It also requires a reconciliation of the computation
between basic and diluted earnings per share. Earlier adoption of this statement
is not permitted for comparability reasons. The Company does not expect basic
earnings per share to be materially different from primary earnings per share.
NOTE 5
<TABLE>
Following are the components of net interest expense:
<CAPTION>
Three Months Ended
MARCH 29, March 30,
In millions 1997 1996
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<S> <C> <C>
Interest expense $(1.5) $(5.6)
Interest income 5.9 --
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Interest income (expense), net $ 4.4 $(5.6)
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</TABLE>
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7
<PAGE> 8
Part I Independent Auditors' Review Report
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The Board of Directors and Shareholders of
CVS Corporation:
We have reviewed the consolidated condensed balance sheets of CVS Corporation as
of March 29, 1997 and March 30, 1996, and the related consolidated condensed
statements of operations and cash flows for the three months then ended. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of CVS Corporation as of December 31,
1996 and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year then ended (not presented herein); and in
our report dated February 6, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 1996, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/ KPMG PEAT MARWICK LLP
- -----------------------------------
KPMG PEAT MARWICK LLP
Providence, Rhode Island
April 18, 1997
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8
<PAGE> 9
Part I Item 2
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTRODUCTION
The following discussion explains material changes in the results of operations
of CVS Corporation ("CVS" or the "Company") for the three months ended March 29,
1997, and the significant developments affecting its financial condition since
December 31, 1996. The following discussion should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
AGREEMENT TO ACQUIRE REVCO D.S., INC.
On February 6, 1997, CVS signed a definitive merger agreement to acquire Revco
D.S., Inc. ("Revco") in a stock for stock merger valued at approximately $2.8
billion. CVS will also assume approximately $900 million of existing Revco debt
as part of this transaction.
The combination of CVS and Revco, which has been approved by the Boards of
Directors of both companies, will bring together two of the leading companies in
the chain-drug industry to create the nation's largest chain drugstore company
based on store count, with approximately 4,000 locations in 24 states and the
District of Columbia. The combination will bring the combined company into
high-growth, contiguous markets in the Northeast, Mid-Atlantic, Southeast and
Midwest regions; and the combined enterprise is expected to rank second in
annual retail drugstore revenues in 1997.
Under the terms of the merger agreement, CVS will combine with Revco in an
exchange of stock that is expected to qualify for treatment as a pooling of
interests transaction, tax free to Revco shareholders. If the merger is
completed, for each share of Revco common stock held, Revco shareholders will
receive the sum of (i) 0.4692 shares of CVS common stock and (ii) the number of
shares of CVS common stock equal to the quotient obtained by dividing $20 by the
average closing price of CVS common stock during ten trading days randomly
selected out of the twenty trading days ending on the fifth trading day
preceding the closing date (collectively, the "Exchange Ratio"), provided that,
under no circumstances will the Exchange Ratio exceed 1.0097 or be less than
0.8837.
The transaction is subject to approval by the shareholders of both companies,
expiration of the applicable waiting period under the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended, and certain other customary
closing conditions. If all the closing conditions have been met, it is expected
that the transaction will be completed by mid-year 1997.
On March 21, 1997, CVS and Revco received a request for additional information
from the Federal Trade Commission relating to CVS' proposed acquisition of
Revco.
RESULTS OF OPERATIONS
The results of operations of the Company's former footwear segment, apparel
segment and toys and home furnishings segment have been classified as
discontinued operations in the accompanying consolidated condensed statements of
operations for all periods presented. The following management discussion
focuses primarily on continuing operations.
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9
<PAGE> 10
Part I Item 2
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
NET SALES for the first quarter of 1997 increased $256.6 million or 20.4% to
$1.5 billion, compared to net sales of $1.3 billion for the first quarter of
1996. The increase in net sales resulted from strong performances in both the
front store (which increased $105.9 million or 15.2%, compared to 1996) and
pharmacy (which increased $143.8 million or 25.8%, compared to 1996). Front
store sales were positively impacted by the Easter selling season occurring
during the first quarter in 1997 versus the second quarter in 1996. Growth in
pharmacy sales was primarily driven by (i) increased penetration into managed
care markets, (ii) the purchase of prescription files from independent
pharmacies and (iii) favorable trends, including an aging American population,
greater demand for retail formats that provide easy access and convenience,
discovery of new drug therapies and a need for cost-effective healthcare
solutions.
Same store sales, consisting of sales from stores that have been open for more
than one year, rose 15.5%, with pharmacy same store sales increasing 22.3%.
Pharmacy sales were 46.7% of total sales in the first quarter of 1997, compared
to 44.5% in the first quarter of 1996. Third party prescription sales were 82.9%
of pharmacy sales in the first quarter of 1997, compared to 80.8% in 1996.
GROSS MARGIN for the first quarter of 1997 increased $69.3 million or 19.1% to
$431.3 million, compared $362.0 million in 1996. The increase in gross margin
dollars was primarily due to the increase in net sales for the quarter.
Gross margin as a percentage of net sales for the first quarter of 1997 was
28.5%, compared to 28.8 % for the first quarter of 1996. The 30 basis point
reduction in 1997 was primarily due to the continued increase in lower gross
margin third party prescription sales and the increase in pharmacy sales as a
percentage of total sales.
TOTAL OPERATING EXPENSES for the first quarter of 1997 were $336.7 million or
22.2% of net sales, compared to $290.6 million or 23.1% of net sales for the
first quarter of 1996. The 90 basis point improvement from 1996 was primarily
due to (i) the benefit derived from sales in our existing store base growing at
a faster rate than operating costs, (ii) the benefit derived from a cost
reduction program, which included, among other things, closing Melville
Corporation's Corporate Headquarters (the "Cost Reduction Program") and (iii)
the benefit derived from key technology investments such as our RX 2000 Pharmacy
System, Interactive Voice Response System for prescription refills, Pharmacy
Data Warehouse, Point-of-Sale System, Retail Data Warehouse and Field Management
System. These systems have collectively allowed the Company to reduce the labor
costs associated with filling prescriptions, managing third party healthcare
plans, managing promotional events and scheduling employees.
OPERATING PROFIT for the first quarter of 1997 increased $23.2 million or 32.5%
to $94.6 million, compared to $71.4 million for the first quarter of 1996.
Operating profit as a percentage of net sales was 6.2% in the first quarter of
1997, compared to 5.7% in 1996. The improvement in operating profit in 1997 is
primarily due to (i) leveraging sales growth, (ii) stable front store margins,
(iii) the benefits derived from key technology investments, (iv) controlling
fixed costs and (v) the benefit derived from the Cost Reduction Program.
OTHER INCOME (EXPENSE), NET for the first quarter of 1997 amounted to income of
$4.4 million, compared to an expense of $2.8 million for the first quarter of
1996. The interest income in 1997 was primarily the result of the Company's
strong cash position and the interest income realized on the notes receivable
that were received as a portion of the proceeds from the sale of certain former
divisions. Dividend income in 1996 was earned on equity securities that the
Company received as a portion of the proceeds from the sale of the Marshalls
division to The TJX Companies, Inc. in 1995. These equity securities were sold
during 1996.
EARNINGS FROM CONTINUING OPERATIONS for the first quarter of 1997 increased
$17.8 million or 43.8% to $58.4 million, or $.51 per share, compared to $40.6
million, or $.35 per share for the first quarter of 1996.
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10
<PAGE> 11
Part I Item 2
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
NET EARNINGS, including continuing and discontinued operations, were $58.5
million, or $.51 per share, compared to $14.2 million, or $.10 per share for the
first quarter of 1996.
As of March 29, 1997, CVS operated 1,424 stores in 14 states and the district of
Columbia, an increase of 4.2% from 1,367 stores as of March 30, 1996.
FINANCIAL CONDITION AND LIQUIDITY
The Company has three primary sources of liquidity: (i) cash provided by
operations, (ii) commercial paper and (iii) bank loan participation notes. The
Company's commercial paper program is supported by a $320 million, five-year
unsecured revolving credit facility (the "Credit Facility"). The Credit Facility
contains customary financial and operating covenants. Management believes that
the restrictions contained in these covenants do not materially affect the
company's financial flexibility.
The Company issues commercial paper to finance, in part, its seasonal inventory
requirements and capital expenditures. Borrowing levels throughout the year are
typically higher than those reflected in the Company's year-end balance sheet.
Management believes that the Company's cash on hand and cash provided by
operations, together with its ability to secure short-term financing through
commercial paper and bank loan participation notes, will be sufficient to cover
its working capital, capital expenditure and debt service requirements.
For the three months ended March 29, 1997, cash and cash equivalents decreased
$89.3 million to $334.6 million.
NET CASH USED IN OPERATING ACTIVITIES decreased $255.6 million to $13.1 million
for the three months ended March 29, 1997, compared to the first quarter of 1996
primarily due to (i) improved earnings, (ii) lower inventory levels primarily
due to the Easter selling season occurring during the first quarter in 1997
versus the second quarter in 1996 and (iii) decreases in accounts payable and
accrued expenses primarily related to the Company's discontinued operations.
NET CASH USED IN INVESTING ACTIVITIES decreased $18.5 million to $17.2 million
during the three months ended March 29, 1997, compared to the first quarter of
1996 primarily due to the lower capital expenditures that resulted from the
Company's discontinued operations.
NET CASH USED IN FINANCING ACTIVITIES increased $323.8 million to $59.0 during
the three months ended March 29, 1997, compared to the first quarter of 1996
primarily due to the Company's strong cash position which resulted in lower
borrowing levels for the first quarter of 1997, offset partially by a smaller
decrease in book overdrafts.
Management believes that the Company's cash on hand and cash provided by
operations, together with its ability to secure short-term financing through
commercial paper and bank loan participation notes (under an expanded credit
facility which the Company expects to have in place prior to the closing of the
contemplated merger), will be sufficient to cover the combined working capital,
capital expenditure and debt service requirements of CVS and Revco in the event
the contemplated merger is completed.
CAPITAL EXPENDITURES
Capital expenditures were $19.4 million and $49.0 million in the first three
months of 1997 and 1996, respectively. These expenditures were primarily for
(i) new stores, (ii) improvements to existing stores, (iii) store equipment,
(iv) information systems and (v) distribution and office facilities. The
lower capital expenditure level in 1997 was primarily due to the Company's
discontinued operations.
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11
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Part II Item 6
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Exhibits and Reports on Form 8-K
Exhibits:
- --------
11 Computation of Per Common Share Earnings
15 Letter re: Unaudited Interim Financial Information
27 Financial Data Schedule - March 29, 1997
Reports on Form 8-K:
- -------------------
During the three months ended March 29, 1997, the Registrant filed a
current report on Form 8-K dated February 7, 1997 in connection with the
Registrant's signing of a definitive merger agreement to acquire
Revco D.S., Inc. in a stock for stock merger valued at approximately $2.8
billion. The Registrant also filed a current report on Form 8-K dated
March 26, 1997 in connection with the Registrant's receipt of a request
from the Federal Trade Commission for additional information relating to
the Registrant's proposed acquisition of Revco.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CVS Corporation
(Registrant)
/s/ CHARLES C. CONAWAY
- ---------------------------------
CHARLES C. CONAWAY
Executive Vice President and Chief Financial Officer
May 12, 1997
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12
<PAGE> 1
<TABLE>
Part II Exhibit 11
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Computation of Per Common Share Earnings
<CAPTION>
Three Months Ended
MARCH 29, March 30,
In millions, except per share amounts 1997 1996
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<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
Net earnings $ 58.5 $ 14.2
Less:Preference dividends, net (3.6) (3.5)
- --------------------------------------------------------------------------------
Net earnings used to calculate
primary earnings per common share $ 54.9 $ 10.7
- --------------------------------------------------------------------------------
Weighted average number of shares outstanding 106.9 105.2
Add: Weighted average number of shares which
could have been issued upon exercise
of outstanding stock options 1.2 --
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Weighted average number of shares used to
compute primary earnings per common share 108.1 105.2
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Primary earnings per common share $ .51 $ .10
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FULLY DILUTED EARNINGS PER COMMON SHARE:
Net earnings $ 58.5 $ 14.2
Less:Adjustments, assuming conversion of the
Series One ESOP Convertible Preference
Stock, for the following: (i) additional
contributions to the ESOP to cover the
shortfall between the Series One ESOP
Convertible Preference Stock and Common
Stock dividends and (ii) reductions in
incentive bonuses and profit sharing,
net of tax benefits (1.8) (2.9)
- --------------------------------------------------------------------------------
Net earnings used to calculate fully diluted
earnings per common share $ 56.7 $ 11.3
- --------------------------------------------------------------------------------
Weighted average number of shares outstanding 106.9 105.2
Add: Weighted average number of shares which
could have been issued upon conversion
of the Series One ESOP Convertible
Preference Shares 5.8 7.7
Add: Weighted average number of shares which
could have been issued upon exercise
of outstanding stock options 1.4 --
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Weighted average number of shares used to
compute fully diluted earnings per
common share 114.1 112.9
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Fully diluted earnings per common share $ .50 $ .10
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</TABLE>
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<PAGE> 1
Part II Exhibit 15
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Letter re: Unaudited Interim Financial Information
CVS Corporation
Woonsocket, Rhode Island
Board of Directors:
Re: Registration Statements Numbers 33-40251, 33-17181, 2-97913, 2-77397
and 2-53766 on Form S-8 and 333-24163 on Form S-4
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated April 18, 1997 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG PEAT MARWICK LLP
- ----------------------------------
KPMG PEAT MARWICK LLP
Providence, Rhode Island
May 9, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEETS, AND THE CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<EXCHANGE-RATE> 1
<CASH> 334,600
<SECURITIES> 179,500
<RECEIVABLES> 176,700
<ALLOWANCES> 12,900
<INVENTORY> 1,053,800
<CURRENT-ASSETS> 1,901,600
<PP&E> 932,500
<DEPRECIATION> 326,600
<TOTAL-ASSETS> 2,758,600
<CURRENT-LIABILITIES> 1,044,700
<BONDS> 294,000
0
0
<COMMON> 1,100
<OTHER-SE> 1,311,400
<TOTAL-LIABILITY-AND-EQUITY> 2,758,600
<SALES> 1,515,000
<TOTAL-REVENUES> 1,515,000
<CGS> 1,083,700
<TOTAL-COSTS> 1,083,700
<OTHER-EXPENSES> 336,700
<LOSS-PROVISION> 2,900
<INTEREST-EXPENSE> (4,400)
<INCOME-PRETAX> 99,000
<INCOME-TAX> 40,600
<INCOME-CONTINUING> 58,400
<DISCONTINUED> 100
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,500
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
