CVS CAREMARK CORPORATION Deborah Sechrist BUS 111 02

CVS CAREMARK CORPORATION Deborah Sechrist BUS 111 -02 (WF)S 13

Executive Summary CVS Caremark is the largest pharmacy health care provider in the US operating more than 7, 400 CVS/pharmacy stores with integrated offerings across the entire spectrum of pharmacy care. CVS is reinventing pharmacy to offer innovative solutions that help people on their path to better health. Their Focus: • Enhancing access to care • Lower overall health care costs • Improving health outcomes The company is looking forward to a very profitable year and moving forward with their innovative plans to help people manage their health and health care costs. As shown, their Gross Profits, Income from operations and Net income has been steadily increasing year over year. http: //www. sec. gov/Archives/edgar/data/64803/000110465913011354/a 1228799_110 k. htm

Part A. Introduction • Larry J. Merlo, Chief Executive Officer • One CVS Drive, Woonsocket, Rhode Island 02895 • Latest fiscal year December 31, 2012 • Pharmacy Health Care Provider • United States

Part A. Audit Report • Independent auditor: Ernst & Young, LLP. • Per the independent Auditors: In there opinion, the company maintained, in all material respects, effective internal control over financial reporting based on the COSO criteria.

Part A. Stock Market Information • The most recent price of the company’s stock: $58. 95 - 5/3/13 • Twelve month trading range of the company’s stock: $43. 30 - $59. 25 (6/1/12 – 5/1/13) • Dividend per share: $3. 22 • Date of the above information: 5/4/2013 • Based on the 52 wk growth I would BUY stock in this Company.

Part B. Industry Situation and Company Plans • Create a new model for pharmacy Care. • • • Aging population Increase in the number of insured, Affordable Care Act. Chronic Disease Prevention • Developing breakthrough adherence interventions. • • • Helps lower costs Improves access Produces better patient outcomes • Helping to transform primary care. • • Expected shortage of primary care physicians Creation of Minute Clinics • • • Provide treatment for everyday common ailments Immunizations Physicals Chronic disease monitoring Other forms of non-acute care CVS Caremark 2012 Annual Report

Part C. Income Statement • The Accounting format used by CVS Caremark is multistep format. $ in Millions • The gross profit increased, due to an increase in Net Revenue.

Part C. Balance Sheet • The liabilities increased but also an increase in assets. The company purchased property and equipment. This is working well for the company, as assets increase, the company is going to be stronger which is good for the stockholders.

Part C. Statement of Cash Flows • The company growing through investing activities such as buying property, plant and equipment: $2, 007 in 2012 and $1, 868 (in millions) • The primary source of financing long-term loans and Capital Surplus. • Overall, cash has increased over the past two years.

Part D. Accounting Policies • Revenue recognition: Sales and amount owed to the network pharmacy. . • Cash: Temporary investments with maturities of three months or less when purchased. The company invests in short-term money market funds, commercial paper and time deposits. • Short-term investments: Consists of Certificate of deposits with initial maturities of greater than three months when purchased.

Part D. Accounting Policies • Inventory: Prior to 2012 the company uses the lower of cost or market on FIFO for retail inventory, Weighted for it’s mail service and specialty pharmacies, and Cost method on FIFO for the distribution centers. Effective 1/1/2012 the Company changed Prescription drug inventories to Weighted average cost method.

Part D. Accounting Policies Notes to Financial Statements 1. Significant Accounting Policies 2. Changes in Accounting Principles 3. Business Combinations 4. Discontinued Operations 5. Goodwill and Other Intangibles 6. Shared Repurchased Programs 7. Borrowing and Credit Agreements 8. Leases 9. Medicare Part D 10. Pension Plans and Other Postretirement Benefits 11. Stock Incentive Plans 12. Income Taxes 13. Commitments and Contingencies 14. Segment Reporting 15. Earnings per Common Share

Part E. Financial Analysis Liquidity Ratios 2012 2011 Working Capitol 1. 69 1. 40 Operating cashflow and Net Income appear to be nearly in sync. Current Ratio 1. 44 1. 56 In 2011 the Company had a better ratio but still has the assets to pay current Liabilities Receivable Turnover 19. 7 19. 5 In 2012 the company had a slightly higher turnover rate on receivable accounts. Average days sales uncollected 18. 5 18. 7 In 2012 the company improved on receivable account collections. Inventory turnover 9. 67 8. 34 In 2012 the company had significant increase in Inventory turnover. Average dayspast two 37. 7 For the inventory on hand In 2012 the company showed a faster ratio 42. 3 calculate years, and comment on: from purchase to sale of inventory.

Part E. Financial Analysis Profitability Ratios : 2012 2011 Profit Margin 3. 1% 3. 2% Performance only dipped slightly from 20112012. Asset Turnover 1. 89 1. 69 In 2012 the company used assets to generate revenue better than 2011. Return on Assets 2. 68 2. 37 In 2012 the higher ratio indicates dollars of sales generated for each dollar invested means greater efficiency. Return on Equity 10. 2% 9. 1% Higher ratio means greater return for stockholders.

Part E. Financial Analysis Solvency Ratio • Due to the increase in the ratio, the company is at a greater financial risk in 2012 than it was in 2011.

Part E. Financial Analysis Market Strength Ratios • A Higher yield means a greater return so the company shares of stock has increased. • An increase per share means profitability for the stockholders.