CVS 2004 Annual Report Download - page 14

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To Our Shareholders:
The past year has been a rewarding one at CVS. While continuing to build on
our solid core business, we made a significant purchase that positions us for
even stronger performance in the years ahead. Our acquisition of 1,268 Eckerd
stores gives us a substantial presence in the high-growth Florida and Texas
markets. Moreover,the addition of Eckerd Health Services (EHS) to our
PharmaCare subsidiary makes us the fourth-largest full-service pharmacy
benefits manager (PBM) in the United States, significantly broadening the
diversity of our client base and enhancing our competitive position.
We knew that executing our organic growth strategy while integrating the
Eckerd acquisition would seem to be an ambitious undertaking to many outside
CVS. However, as the opening pages of this report reveal, challenges like these
are really all in a day’s work for our experienced management team and CVS
colleagues across the country. We know what it takes to implement “CVS easy,”
improve customer satisfaction, open new stores, and drive productivity, and we
aim to excel at doing all of them virtually every hour of every day in every store.
Enjoying strong sales and earnings growth
Before discussing our activities in more detail, let me review the good news
regarding our 2004 results. Driven by the strength of our existing business and
the addition of the former Eckerd assets, sales rose 15.1 percent to a record
$30.59 billion. Diluted earnings per share were $2.20, including a one-time,
non-cash tax benefit of 14.5 cents as well as a one-time, non-cash negative
adjustment of 10 cents relating to a change in accounting practices for leases.
The acquisition diluted per-share earnings by 16 cents, and we also had one less
week included in our 2004 results compared to 2003.
12
Financial Highlights
2004 2003
In millions, except per share 52 weeks 53 weeks % Change
Sales $30,594.3 $26,588.0 15.1
Operating profit 1,454.7 1,423.6 2.2
Net earnings 918.8 847.3 8.4
Diluted earnings per common share 2.20 2.06 6.8
Stock price at calendar year end 45.07 36.12 24.8
Market capitalization at calendar year end 18,071 14,281 26.5