WOONSOCKET – CVS Caremark Corp. (NYSE: CVS) today posted record revenue and earnings for the fiscal year and fourth quarter ended Dec. 31. “I’m really proud of what our team accomplished last year,” said Thomas M. Ryan, the company’s president and chief executive officer.

The company’s annual profit rose 21.81 percent to $3.21 billion – eclipsing the previous record of $2.64 billion set in fiscal 2007 (READ MORE) – on revenue that rose 14.60 percent to $76.33 billion.

Earnings per diluted common share rose to $2.18 from the year-ago $1.92. Full-year earnings from continuing operations rose 26.81 percent to $3.34 billion, more than offsetting a $132 million charge from discontinued operations. In the retail drugstore division, same-store sales rose 4.5 percent last year, as pharmacy sales rose 4.8 percent and front-end sales rose 3.6 percent.

The results lagged the company’s January prediction that it would achieve full-year earnings of $2.42 to $2.47 per share, including the California-based Longs Drug Stores Corp. retail and pharmacy benefits management (PBM) chain it acquired in October. (READ MORE)

But Ryan described 2008 as “a year of very significant accomplishments for CVS Caremark. Across the enterprise our colleagues remained focused on customer service, execution and expense control.

“As a result,” Ryan said, “our overall financial results were excellent for the year, with revenue increasing 15 percent, same-store sales leading the industry, operating margins hitting an all-time record and adjusted [earnings per share] from continuing operations climbing 20 percent. We also generated $2 billion in free cash flow for the year.”

The company noted that, on Dec. 23, its board of directors approved a change in the fiscal year – which now ends on Dec. 31 rather than on the Saturday nearest that date – “to better reflect our position in the health care, rather than retail, industry.” As a result, CVS Caremark’s fiscal 2008 was 368 days long, four days longer than FY 2007, while the FY 2008 fourth quarter was 95 days long, up from 91 days in the year-ago period.

For the quarter ended Dec. 31, CVS posted net earnings of $952.8 million, a 16.97 percent increase from the year-ago $815.0 million, on fourth-quarter revenue that rose 10.02 percent to $24.14 billion. Earnings per diluted common share rose to 65 cents from the FY 2007 fourth quarter’s 55 cents.

That bettered the company’s results in the third quarter, when CVS Caremark posted earnings per share of 50 cents, up from 45 cents a year earlier, as its profit rose 6.7 percent year over year to $736.0 million on revenue that climbed 1.9 percent to $20.9 billion. (READ MORE)

In the retail drugstore division, total fourth-quarter revenue rose 18.8 percent compared with a year ago to $13.8 billion. Same-store sales rose 3.6 percent, led by pharmacy sales, which rose 4.5 percent despite the 260-basis-point impact of recent generic-drug introduction, while front-end same-store sales rose 1.8 percent compared with the FY 2007 fourth quarter.

Other highlights of the fourth quarter – apart from the Longs acquisition, which CVS Caremark completed at the end of October – included December honors from the national Parents Television Council, which lauded CVS Caremark as a “family-friendly” advertiser (READ MORE); the launch of a new prescription savings plan, called the “Health Savings Pass” (READ MORE);and the creation of a new post of executive vice president and chief medical officer, for which the company hired Dr. Troyen A. “Troy” Brennan, a former hospital administrator and Aetna medical chief. (READ MORE)

Moreover, Ryan said, CVS Caremark last year “made significant strides in solidifying the culture across our enterprise. … [And] we introduced our Proactive Pharmacy Care offerings, which provide earlier, easier and more effective pharmacy and health services that improve health outcomes and reduce overall costs for our clients, their plan participants and our customers.

“In this difficult economic climate – and a landscape where control of health care costs is urgently needed – our unique capabilities should prove more valuable than ever.”

The company’s board of directors declared dividends per common share of 6.9 cents for the fourth quarter, a 15 percent increase from the year-ago 6 cents per share, and 25.8 cents for all of FY 2008, a 12.79 percent increase from the preceding fiscal year’s 22.875 cents per share.

During the fourth quarter, CVS Caremark opened 52 new retail pharmacies, acquired the 529 Longs Drugs stores, closed six stores and relocated seven others. As of Dec. 31, that left the company with 6,923 CVS/pharmacy and Longs Drugs retail stores, 58 specialty pharmacy stores, 19 specialty mail order pharmacies and 7 mail order pharmacies in 44 states, the District of Columbia and Puerto Rico. And more than 500 of CVS’s retail pharmacies also included in-store MinuteClinic walk-in health care centers.

“We plan to open up 250 to 300 new or relocated stores in 2009,” CFO David B. Rickard added during a conference call today that also included an announcement that he plans to retire late this year. (READ MORE)

He predicted first-quarter 2009 earnings would be “flat to down” at 48 to 50 cents per diluted share. “This is not a typical expectation of ours,” Rickard said. He cited Longs integration costs, anticipated generic-drug introductions, a quarter that will be shorter than the 2008 period and the timing of the Easter holiday, which this year will fall in the second quarter. “We continue to expect all the other quarters this year to show good progress versus last year with the fourth quarter being probably the strongest quarter from a growth perspective.”

In other news this week, CVS Caremark announced it has reached a settlement with federal officials over claims that certain customer records had been improperly discarded.

CVS Caremark agreed to pay $2.25 million to settle civil charges under the U.S. Health Insurance Portability and Accountability Act, the medical-privacy law known as HIPPA, according to a report by Bloomberg News.

But the company stressed that it “has expressly denied engaging in any wrongful conduct,” and agreed to the settlement only “to avoid the time and expense of further legal proceedings.”

The settlement – with the U.S. Federal Trade Commission (FTC) and the U.S. Department of Health and Human Services Office for Civil Rights (OCR) – “resolves an investigation prompted by media reports from 2006 about alleged incidents of inadvertent disposal of patient information in dumpsters at a limited number of CVS/pharmacy locations in a manner that was inconsistent with the company’s waste disposal procedures,” the company said.

Those incidents included what the Texas Attorney General’s office described as the discovery of thousands of prescription records and credit-card receipts in a trash bin behind a CVS/pharmacy store in Liberty, Texas. (READ MORE)

The records apparently had been discarded as the Liberty store was being closed and its operations moved to another site, the company said at the time. “The disposal of this information in the store Dumpster was a violation of our record-retention and privacy policies,” CVS/Caremark spokesman Mike DeAngelis said at the time, adding that the company had cooperated fully with investigators.

CVS Caremark emphasized that no harm to consumers is known to have resulted from that or other alleged incidents.

The federal probe “was initiated prior to the merger between CVS and Caremark, involved CVS/pharmacy retail locations only and did not relate to the PBM business,” the company noted. “The company responded to these reports by promptly enhancing its retail waste disposal policies and training programs, and instituted a chain-wide shredding program for confidential waste.”

Those policy changes are formalized in the company’s agreement with the FTC and OCR, which also includes an agreement that the company submit to audits every two years for the next two decades, federal officials said.

The settlement “will restore appropriate privacy protections to tens of millions of people across the country,” FTC Chairman William Kovacic said in a statement. “It also sends a strong message” that organizations “are required to secure consumers’ private information.”

CVS Caremark Corp. (NYSE: CVS) – the nation’s largest provider of prescription medications – operates the CVS/pharmacy and Longs Drug Stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. Additional information is available at investor.cvs.com.