CVS Caremark

CVS Caremark
Dallas Toth
ACG 2021.001

Executive Summary
•CVS Caremark, under the supervision of
independent auditors monitoring the
company’s financial statements, has
operated both progressively and profitably
over the last few years. It has increased
revenues, decreased cost, and and
maintained the confidence of shareholders.
http://phx.corporateir.net/phoenix.zhtml?c=99533&p=irolreportsannual#.TokJyJArHuE.email

Introduction
• Chief Executive Officer:
Thomas M. Ryan
• Company Headquarters:
CVS Caremark Corporation
One CVS Drive
Woonsocket, RI 02895
• End date of most recent fiscal year:
2010

Mission and Locations
• CVS Caremark provides top quality
pharmaceutical services, health management
and clinical programs, and prescription refills
• Operating in the U.S.A., CVS Caremark offers
three renowned specialties:

CVS Caremark: (Service Specialties)
• Retail Pharmacy:
7,000 locations in US
• Minute Clinic:
Operates in 25 states with 560 stores
• PBM Services
(Pharmacy Benefit Management)
Total Operation Locations: 44 states, District of Columbia, and
Puerto Rico

Audit Report
• Company’s Independent Auditors:
Ernst and Young LLP
• The auditors explained that in terms of
generally accepted accounting principles, the
companies financial statements are
accurately accounted for.

Stock Market: (Current)

12 Month Trading Range of Stock

Stock Thoughts
• Although I am personally opposed to stock
investment in this present economic
recession, I objectively believe from a
business perspective that buying stock from
CVS Caremark is currently a good investment.

Industry Status and Future Plans
As of the present, CVS is the largest Pharmaceutical
provider functioning in the Unites States of America and
is always trying to improve. Their ambitions include
lowing the overall cost of plan members with health
insurance and their corresponding sponsors. Its goals
consist of improving customer satisfaction from the retail
level, pharmacy level, prescription mail orders, and drivethrough
by increasing efficiency.
Sources:
http://info.cvscaremark.com/our-company
http://info.cvscaremark.com/our-company/our-culture

Income Statement
•The format is most like a multi-step because it goes
though a series of subtotals, or steps in order to
calculate a net income.
•Gross margin, income from operations, and net
income have declined slightly since the past fiscal year.
(Millions) Fiscal Year 2010 Fiscal Year 2009
Gross Profit $20,257 $20,380
Income from Operations $6,165 $6,438
Net Income $96,413 $98,729

December 31,
2010 2009

December 31,
2010 2009

Balance Sheet
Year Total Assets= Total Liabilities + Total Stockholders Equity
2010 $62,169 = $24,469 + $37,700
2009 $61,641 = $25,873 + $35,768

Analysis
• The corporation’s total assets increased slightly
as a whole, indicating the company appears
healthy and growing.
• The current liabilities have actually been reduced
from the past year. This shows signs of corporate
innovation in reducing costs and improving
overall efficiency.
• We can also observe the “stronger” increase in
stockholders equity, a sign that investors have
confidence in the company’s future.
Stockholder’s equity shows the most change.

Statement of Cash Flows
•The cash flows from operations are all
greater in amount than net income for
the past two years.
•CVS Caremark is growing by investing
in buying property, plant and equipment,
and newer technologies.
•Overall, cash has increased over the
past two years.

Finance Committee Composition
• LINK: http://phx.corporate-ir.net/phoenix.zhtml?c=99533&p=irol-govcommcomp

Accounting Policies
•Revenue Recognition: The PSS has a system where it sells
prescription drugs through its mail service. It then recognizes
revenues through its mail service pharmacies and under retail
pharmacy network contracts. It then uses the gross method in
order to contract the prices negotiated with customers.
•Cash and cash equivalents: are comprised of cash and temporary
investments with maturities that may last up to three months
maximum. CVS then invests in commercial paper, short-term
money market funds, and time deposits.
•Inventories: Inventories of CVS are stated at the lower of cost or
market using FIFO method. Inventory and cost of sales are then
determined.
•Property and equipment: Improvements, equipment, and
property of its leased stores are depreciated. This is done using
the straight-line method.

Topics of the Notes to the Financial
1. Significant Accounting Policies
2. Business Combinations
3. Goodwill and other Intangibles
4. Share Repurchase Programs
5. Borrowing and Credit
Agreements
6. Leases
7. Medicare Part D
8. Employee Stock Ownership Plan
9. Pension Plans and other
Postretirement Benefits
10. Stock Incentive Plans
Statements:
11. Income Taxes
12. Commitments and
Contingencies
13. Segment Reporting
14. Earnings Per Common Share
15. Quarterly Financial Information
(Unaudited)

Financial Analysis
Liquidity Ratios
Year 2010 Year 2009
Working Capitol $6,636 $5,237
Current Ratio 1.60 1.43
Receivable Turnover 19.58 18.09
Average Days’ Sales Uncollected 18.64 20.18
Inventory Turnover 7.2 8.0
Average Days’ Inventory On Hand 50.69 45.63
Working Capitol has increased. Current Ratio has also increased meaning debt
paying ability has risen. Receivable Turnover has increased meaning the number
of times receivables have turned into cash has gone up. Average Days’ Inventory
On Hand has increased, signifying goods have taken slightly longer to sell.
Average Days’ Sales Uncollected has declined which means payments are
arriving faster and Inventory Turnover has declined slightly, indicating the goods
have been leaving slightly slower. Overall, the company looks in reasonably
healthy shape.

Financial Analysis
Profitability Ratios
Year 2010 Year 2009
Profit Margin .04 .04
Asset Turnover 1.56 1.60
Return on Assets .06 .06
Return on Equity .09 .10
The Profit Margin has remained constant. The Asset Turnover has
decreased slightly meaning the efficiency of assets used to
produce sales has lowered. Return on Assets has remained
constant. Return on Equity has decreased meaning the amount
earned by CVS Caremark to each dollar stockholders invested in
the corporation has lowered.

Financial Analysis
Solvency Ratio
2010 2009
Debt to Equity .65 .72
The Debt to Equity is calculated by dividing the Total
Liabilities by the Stockholders’ Equity. As we can see in the
table above, the Debt to Equity Ratio has slightly decreased.
This signifies that the portion of CVS Caremark’s assets
financed by creditors and proportion financed by
stockholders has lowered since the past year.

Financial Analysis
Market Strength Ratios
Year 2010 Year 2009
Price/earnings per Share .94 .92
Dividend Yield 1.06 1.08
As we observe the table above, we notice the
increase in price/earnings per Share. This indicates
that investor confidence in the company’s future has
increased. The dividends yield, however, has
slightly declined meaning the stock’s current return
to an investor has lessened slightly.