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CVS HEALTH Corp Annual Report (Amendment), Year Ended Dec 31, 1998

Filing Date
Filed November 17, 1999
Period End
December 31, 1998
Security
CVS
In the record · 2016–202610-K1110-Q328-K181

CVS filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 181 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Leadership change8-K · Aug ’19Aug ’19
  3. Impairment8-K · Nov ’21Nov ’21
  4. Leadership change8-K · Apr ’25Apr ’25

01—Abstract

Summary

Summary of the 10-K/A filed November 17, 1999. Cited figures are marked; the original filing is the authoritative source.

This Form 10-K/A amends CVS Corporation's 1998 annual report solely to restate its 1997 and 1998 consolidated financial statements, following SEC review of a registration statement for an exchange offer of $300 milliona of debt securities sold in a private placement on February 11, 1999.

The restatement shifts nonrecurring merger-related costs between quarters in 1997 and 1998. Per the filing, it has no effect on the two years viewed together, on 1999 or future years, on historical or future cash flows, or on earnings before merger, restructuring and other nonrecurring charges. Restated diluted earnings per share from continuing operations are $0.19b for 1997 (previously reported as $0.16) and $0.95 for 1998 (previously reported as $0.98), with 1998 net earnings restated to $384.5 million from $396.4 million.

Operationally, the filing reports 1998 net sales of $15,273.6 millionc, up 11.1%, with pharmacy sales at 58% of total sales and third-party prescription sales at 84% of pharmacy sales. Operating profit was $751.9 million, and comparable operating profit rose 20.7% to $940.5 million after excluding nonrecurring charges. The company operated 4,122 stores in 24 states and the District of Columbia at year-end 1998, and total assets were $6,686.2 million.

Management highlights the completed Revco integration, Arbor integration progress with a targeted $30 milliond of 1999 cost savings, and a 1999 capital expenditure plan of $450 million to $500 million. The filing also discloses material contingencies: two pharmaceutical pricing lawsuits in which CVS is a plaintiff or class member, and guarantees of lease obligations for approximately 1,600 former stores, estimated at about $1.1 billion if each purchaser became insolvent. Management characterizes the insolvency scenario as highly unlikely.

02—Key points

Key Highlights

  1. Restated diluted EPS from continuing operations: $0.19 for 1997 (previously $0.16) and $0.95 for 1998 (previously $0.98), per the filing's restatement table.
  2. The restatement reflects nonrecurring IT system elimination costs and Revco store fixture removal costs, and the filing states it has no effect on 1999 or future years.
  3. 1998 net sales of $15,273.6 million, up 11.1%; same store sales rose 10.8%.
  4. Operating profit of $751.9 million in 1998; comparable operating profit increased 20.7% to $940.5 million after excluding nonrecurring charges.
  5. Pharmacy sales were 58% of total sales in 1998, with the company stating it was the largest drugstore chain in prescriptions filled and pharmacy sales.
  6. Operated 4,122 stores in 24 states and the District of Columbia at December 31, 1998, with a plan for about 140 new stores and 130 closures in 1999.
  7. Contingent exposure of about $1.1 billion from lease guarantees on approximately 1,600 former stores, which management considers highly unlikely to be triggered.

03—Questions

Frequently Asked Questions

  1. Why was CVS's 10-K/A filed?

    The amendment restates the 1997 and 1998 consolidated financial statements after the SEC reviewed a May 11, 1999 Form S-4 registration statement for an exchange offer of $300 million of debt securities. The restatement moves nonrecurring merger-related costs between quarters in 1997 and 1998.

  2. Does the restatement change CVS's earnings over the two-year period?

    No, according to the filing. It increased 1997 earnings from continuing operations by $11.9 million ($0.03 per diluted share) and decreased 1998 earnings by the same amount, so the two years combined are unchanged.

  3. How did CVS perform in 1998?

    Net sales rose 11.1% to $15.3 billion and net earnings were $384.5 million, or $0.95 per diluted share. The filing describes 1998 as a record year for net sales, operating profit and diluted EPS, excluding nonrecurring charges and gains.

  4. What are the main risks disclosed in the filing?

    The filing discloses lease guarantees of about $1.1 billion for former stores if purchasers became insolvent, which it calls highly unlikely. It also describes pharmaceutical pricing lawsuits and notes that third-party payor pressure has reduced gross margins on third-party sales, and that the company may not sustain its sales growth if it drops more unprofitable programs.

  5. What does CVS plan for 1999?

    The filing states that capital expenditures are expected to total about $450 million to $500 million, including plans to open 140 new stores, relocate 300 existing stores and close 130 stores. It also expects at least $30 million of cost savings from the Arbor merger.

04—Continue

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