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CVS · CVS HEALTH Corp

31 filings

10-K

CVS 10-K Annual Reports

CVS HEALTH Corp - 31 annual reports

Filing record · 2016–202610-K1110-Q328-K181

2025
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2025
CVS Health Corporation (CVS) reported its 2025 fiscal year results, detailing a complex financial picture marked by revenue growth alongside significant operational challenges and strategic shifts. Total revenues increased by 7.8% to $402.1 billion, driven by growth across all segments, particularly in Health Care Benefits and Health Services. However, the company recorded a substantial $5.7 billion goodwill impairment charge related to its Health Care Delivery reporting unit within the Health Services segment, signaling significant valuation headwinds in that area. Furthermore, CVS Health faced substantial legal charges, including approximately $1.2 billion for legacy litigation and a $320 million charge for ongoing opioid litigation, which significantly impacted operating income. Despite these headwinds, the company generated $10.6 billion in net cash from operating activities, demonstrating strong cash flow generation. The company's Health Care Benefits segment saw a 9.7% increase in total revenues, largely due to growth in its government business, while the Health Services segment's adjusted operating income saw a slight decrease, impacted by client price improvements and higher medical benefit ratios in its healthcare delivery business. The Pharmacy & Consumer Wellness segment reported an 11.9% revenue increase, driven by pharmacy drug mix and increased prescription volume. The company ended the year with $8.5 billion in cash and cash equivalents, maintaining its dividend payout of $0.665 per share, reflecting a continued commitment to shareholder returns amidst a challenging operating environment.
Feb 10, 2026
2024
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2024
CVS Health Corporation reported total revenues of $372.8 billion for the fiscal year ended December 31, 2024, a 4.2% increase over the prior year. This growth was primarily driven by the Health Care Benefits segment, which saw a significant 23.7% increase in total revenues, largely due to expansion in Medicare Advantage and individual exchange product lines. However, the company experienced a substantial 38.0% decrease in operating income, falling to $8.5 billion, largely attributed to increased utilization in its Health Care Benefits segment and higher restructuring charges. The Health Services segment saw a 7.1% revenue decline primarily due to the loss of a large client, while the Pharmacy & Consumer Wellness segment reported a 6.6% revenue increase, driven by pharmacy drug mix and prescription volume, despite a decrease in front store sales.
Feb 12, 2025
2023
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2023
CVS Health Corporation (CVS) reported strong top-line growth in its 2023 10-K filing, with total revenues increasing by 10.9% year-over-year to $357.8 billion. This growth was driven by broad-based strength across all segments, notably the Health Services segment which saw a 10.2% revenue increase, bolstered by acquisitions like Oak Street Health and Signify Health. The company also highlighted continued investment in technology and strategic initiatives aimed at enhancing consumer experience and operational efficiency. Despite revenue growth, adjusted operating income saw a slight decrease of 2.7% to $17.5 billion, impacted by increased utilization in Medicare Advantage programs and ongoing competitive pressures within the PBM industry. Key strategic moves included the integration of Oak Street Health and Signify Health, positioning CVS Health to expand its primary care and value-based care capabilities. The company also saw a significant improvement in its Medicare Advantage star ratings for 2024, expected to positively impact future revenues. However, increased interest expenses due to debt financing for acquisitions and higher health care costs in the Health Care Benefits segment presented headwinds. Management remains focused on enterprise-wide cost savings and efficiency improvements to navigate these challenges and drive sustainable long-term growth.
Feb 7, 2024
2022
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2022
CVS Health Corporation reported strong revenue growth in 2022, with total revenues increasing by 10.4% year-over-year to $322.5 billion. This growth was primarily driven by increased membership in the Health Care Benefits segment, higher prescription volumes and specialty pharmacy growth in the Pharmacy Services segment, and robust prescription and front store sales in the Retail/LTC segment. However, operating income saw a significant decrease of 41.3% to $7.7 billion, largely impacted by $5.8 billion in opioid litigation charges and a $2.5 billion loss on assets held for sale related to the long-term care business. The company also experienced a notable decline in its Medicare Advantage star ratings, with only 21% of members in plans rated 4 stars or higher for 2023, down from 87% in 2022, impacting future bonus payment eligibility. Despite the decrease in operating income due to specific charges, CVS Health demonstrated resilience across its core businesses. The company's outlook for 2023 anticipates continued Medicare and Commercial membership growth, improved purchasing economics in Pharmacy Services, and increased prescription volume in Retail/LTC, although offset by pharmacy reimbursement pressures and a decline in COVID-19 related revenues. The company is also pursuing strategic acquisitions, notably Oak Street Health and Signify Health, which are expected to close in 2023, signaling a focus on expanding its care delivery capabilities.
Feb 8, 2023
2021
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2021
CVS Health Corporation (CVS) reported a strong financial performance for the fiscal year ending December 30, 2021, with total revenues increasing by 8.7% to $292.1 billion. This growth was driven by robust performance across all three operating segments: Health Care Benefits, Pharmacy Services, and Retail/Long-Term Care (LTC). The company saw increased prescription volumes, growth in specialty pharmacy, and significant contributions from COVID-19 testing and vaccination services, which helped offset pressures like pharmacy reimbursement rates. Despite a notable store impairment charge of $1.4 billion and a goodwill impairment charge of $431 million related to the LTC business, the company demonstrated resilience. The Health Care Benefits segment experienced a rise in MBR due to increased COVID-19 related costs, but growth in government services partially mitigated this. The company also announced a 10% increase in its quarterly cash dividend and is actively managing its capital structure, including debt repayment and share repurchases. Looking ahead, CVS Health anticipates continued growth, particularly in its Medicare offerings and digital capabilities, while navigating ongoing regulatory and economic uncertainties.
Feb 9, 2022
2020
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2020
CVS Health Corporation's (CVS) 2020 10-K filing highlights a year of significant revenue growth, primarily driven by its Health Care Benefits and Retail/LTC segments. Total revenues increased by 4.6% to $268.7 billion, reflecting growth in membership and the impact of COVID-19-related services. The company demonstrated resilience despite the pandemic, with its Pharmacy Services segment showing improved purchasing economics and growth in specialty pharmacy, contributing to a 15.2% increase in operating income for that segment. The Health Care Benefits segment saw substantial growth, benefiting from increased Medicare membership and a favorable impact from government programs, although this was partially offset by the costs associated with the pandemic response and shifts in membership. Despite facing challenges like reimbursement pressure in the Retail/LTC segment and incremental operating expenses due to COVID-19, CVS Health maintained a strong liquidity position with significant cash reserves and managed its debt effectively through repayment initiatives. The company's strategic focus on integrating its diverse health services, enhancing digital capabilities, and expanding its HealthHUB locations continues to shape its business model. CVS Health played a critical role in the COVID-19 response, offering widespread testing and preparing for vaccine administration, which contributed to its revenue and community presence. The company also highlighted its commitment to its workforce through enhanced benefits and safety protocols during the pandemic. Looking ahead, CVS Health anticipates continued growth driven by its strategic initiatives, though it remains mindful of ongoing regulatory complexities and competitive pressures within the healthcare industry.
Feb 16, 2021
2019
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2019
CVS Health's FY2019 10-K shows a company in the midst of digesting the November 2018 Aetna acquisition. Total revenues rose 32.0% to $256.8 billion, and operating income nearly tripled to $12.0 billion from $4.0 billion, but that comparison is flattered by the absence of the $6.1 billion of 2018 goodwill impairments on the LTC unit. Adjusted operating income, the metric management uses to evaluate segments, grew 36% to $15.3 billion. GAAP net income attributable to CVS was $6.6 billion, or $5.08 per diluted share, versus a $594 million loss in 2018. The effective tax rate fell to 26.3% from 142.4%, largely because the 2018 impairments were mostly non-deductible. The quality of the earnings picture is mixed. Operating cash flow rose to $12.8 billion, and the Aetna acquisition's $8.6 billion of annual revenue contribution is now embedded in the Health Care Benefits segment, which generated $5.2 billion of adjusted operating income. Pharmacy Services and Retail/LTC face continued reimbursement and price-compression pressure, and Retail/LTC adjusted operating income fell 9.4% to $6.7 billion. Management reiterated $800-900 million of Aetna synergies for 2020, but also flagged that the reinstated $15.5 billion Health Insurer Fee in 2020 will raise the effective tax rate and weigh on 2020 net income. Balance sheet leverage remains the central investor concern. Long-term debt stood at roughly $64.7 billion non-current ($68.4 billion total principal), and the company has suspended share repurchases until it reaches its target debt-to-equity ratio. Long-term debt was reduced by about $8 billion during 2019 through tender offers and maturities, and the company's senior debt is rated Baa2/BBB, one notch above the threshold for loss of investment grade at Moody's. The 10-K also lays out substantial regulatory and litigation exposure, including Medicare Advantage risk-adjustment audits and proposed RADV methodology changes, opioid and usual-and-customary pricing suits, and securities class actions tied to the LTC unit. The LTC goodwill cushion is thin, at about 9% above carrying value.
Feb 18, 2020
2018
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2018
CVS Health's 2018 10-K, filed February 28, 2019, is dominated by the November 28, 2018 acquisition of Aetna for roughly $70 billion in equity value (about $78 billion including assumed debt), financed largely with approximately $45 billion of new debt. The deal transforms the company into a four-segment organization (Pharmacy Services, Retail/LTC, Health Care Benefits, Corporate/Other) and adds about 38 million health plan members. Because Aetna was consolidated for only about one month, 2018 results understate the go-forward scale, and the reported figures are heavily distorted by one-time charges. Reported 2018 financials were weak. Total revenues rose 5.3% to $194.6 billion, but operating income fell 57.8% to $4.0 billion, and the company posted a net loss attributable to CVS Health of $594 million (EPS of -$0.57). The decline was driven by $6.1 billion of goodwill impairments in the LTC (long-term care) reporting unit, $485 million of Corporate/Other acquisition transaction and integration costs, and continued price compression in PBM and retail pharmacy. The Retail/LTC segment's operating income collapsed to $620 million from $6.6 billion, while Pharmacy Services was roughly flat at $4.7 billion. Looking forward, management called 2019 a "transition year" focused on integrating Aetna, said it was on track to exceed its 2020 synergy target, and warned that pharmacy reimbursement pressure, a declining benefit from new generic launches, and LTC challenges would weigh on Pharmacy Services and Retail/LTC operating income. Balance-sheet leverage rose sharply: long-term debt went from $22.2 billion to $71.4 billion, and Moody's cut the long-term rating to Baa2 with a negative outlook while S&P moved to BBB. The dividend was held at $0.50 per quarter and share repurchases were paused in 2018. Key risks flagged include ACA and Medicare Advantage policy changes, star-rating dependence, RADV audit exposure, and integration execution.
Feb 28, 2019
2017
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2017
CVS Health's FY2017 10-K (filed February 14, 2018) presents a company in transition. Consolidated net revenues rose 4.1% to $184.8 billion, but gross profit fell 1.1% to $28.5 billion and gross margin compressed to 15.4% (from 16.3%), driven by the mix shift toward the lower-margin Pharmacy Services segment and ongoing price compression and reimbursement pressure. Operating profit declined 8.2% to $9.5 billion. Diluted EPS rose to $6.44 from $4.90, but that increase is flattered by a provisional $1.5 billion non-cash tax benefit from the Tax Cuts and Jobs Act, which lowered the effective tax rate to 19.8% from 38.4%. Excluding that benefit, earnings would have been meaningfully lower. The dominant investor issue is the proposed ~$69 billion equity (~$77 billion including Aetna's debt) acquisition of Aetna, announced December 3, 2017, at $145 in cash plus 0.8378 CVS shares per Aetna share. The deal is expected to close in the second half of 2018 and requires shareholder and regulatory approvals. CVS expects to incur about $45.0 billion of new acquisition debt and assume roughly $8.2 billion of Aetna debt, which increases leverage substantially. Both Moody's and S&P have placed CVS ratings under review for possible downgrade, and a $2.1 billion termination fee applies in certain circumstances. Share repurchases were suspended in Q4 2017, and the company repurchased about $4.4 billion of stock during the year. Within the segments, Pharmacy Services grew revenue 8.9% to $130.6 billion on specialty and network growth, but its gross margin is only 4.6%. Retail/LTC revenue fell 2.1% to $79.4 billion, with same-store sales down 2.6% after CVS Pharmacy lost participation in certain PBM networks. Retail/LTC operating profit fell 11.4%, and the segment absorbed $215 million in store-closure charges and a $181 million goodwill impairment on RxCrossroads, which was subsequently sold to McKesson for $725 million. Aetna itself was about 12.3% of consolidated revenue in 2017. Goodwill and intangibles total $52.1 billion, which creates impairment risk, particularly for the LTC reporting unit, whose fair value exceeded carrying value by only about 1%.
Feb 14, 2018
2016
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2016
CVS Health's fiscal 2016 10-K (filed February 9, 2017) describes a company that grew revenue 15.8% to $177.5 billion, driven mainly by the 2015 acquisitions of Omnicare and the Target pharmacy and clinic businesses, plus growth in specialty pharmacy and Medicare Part D. Operating profit rose 9.3% to $10.3 billion, but gross margin compressed to 16.3% from 17.3% as the mix shifted toward the lower-margin Pharmacy Services segment (4.9% gross margin versus 29.3% for Retail/LTC) and as reimbursement and price pressure persisted. Diluted EPS was $4.90, up from $4.63, and was helped by a lower share count after $4.5 billion of buybacks in 2016. The balance sheet absorbed significant leverage from the 2015 deals. Long-term debt was $25.6 billion plus $1.9 billion of commercial paper, and net interest expense rose to $1.06 billion. Management refinanced aggressively, recording a $643 million loss on early debt extinguishment, and free cash flow after capex of roughly $2.2 billion (operating cash flow of $10.1 billion less capex of $2.2 billion) comfortably covered the $1.84 billion dividend. Goodwill of $38.2 billion and intangibles of $13.5 billion make the balance sheet heavily acquisition-dependent, a point investors should weigh against future impairment risk. Looking forward, the company flagged several headwinds and uncertainties: the policy environment following the November 2016 elections (ACA repeal or replacement, tax reform that could cut the corporate rate from 35%, and tariffs), ongoing PBM client losses and renegotiations, restricted pharmacy networks that exclude CVS Pharmacy, and an expected $225 million charge tied to closing about 70 stores in 2017. It also announced a 18% dividend increase to $2.00 annualized for 2017 and a $15 billion repurchase authorization, and it disclosed a substantial litigation docket, including multiple qui tam and state Medicaid matters related to the Health Savings Pass program.
Feb 9, 2017
2015
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2015
CVS Health's 2015 10-K shows a company in transition. Net revenues rose 10% to $153.3 billion, and net income attributable to CVS Health reached $5.2 billion, or $4.63 per diluted share, up from $3.96 in 2014. Growth was driven by the August 2015 Omnicare acquisition ($9.6 billion cash plus roughly $3.1 billion of assumed debt), the December 2015 purchase of Target's pharmacy and clinic businesses ($1.9 billion), higher generic dispensing rates, and volume growth in both segments. Gross margin compressed to 17.3% from 18.2% as the mix shifted toward the lower-margin Pharmacy Services segment (5.2% gross margin versus 30.5% for Retail/LTC), and the filing cites ongoing price compression and reimbursement pressure. Balance sheet leverage rose sharply. Long-term debt increased to $26.3 billion from $11.6 billion after a $14.8 billion bond issuance in July 2015, and total assets grew to $93.7 billion, with goodwill up to $38.1 billion. Free cash flow was roughly $6.0 billion (operating cash flow of $8.4 billion less $2.4 billion of capital expenditures), and the company returned about $6.6 billion to shareholders through $5.0 billion of buybacks and $1.6 billion of dividends. The Board raised the 2016 quarterly dividend 21% to $0.425, and $7.7 billion remained under the 2014 repurchase authorization. Investors should weigh the earnings growth and scale benefits against higher leverage, integration risk from two large acquisitions, and margin pressure from the PBM business. Management excluded Omnicare and the Target businesses (18% of total assets) from its internal control assessment for 2015, and the 10-K flags several open legal matters, including a Lauriello class action seeking roughly $3.2 billion in compensatory damages with trial scheduled for February 2016.
Feb 9, 2016
2014
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2014
CVS Health's 10-K for fiscal 2014 (filed February 10, 2015) shows a company in the midst of repositioning itself as a "pharmacy innovation company," with the Pharmacy Services and Retail Pharmacy segments both growing. Consolidated net revenues rose 10.1% to $139.4 billion in 2014 from $126.8 billion, driven mainly by Pharmacy Services (up 16.1%, helped by the January 2014 Coram infusion acquisition and Specialty Connect) and Retail Pharmacy (up 3.3%, with same-store pharmacy sales up 4.8%). Operating profit grew 9.5% to $8.8 billion, and diluted EPS rose to $3.96 from $3.74, though gross margin compressed to 18.2% from 18.8% because the mix shifted toward the lower-margin PBM business. Front store same-store sales fell 4.0%, partly from the company's decision to stop selling tobacco. Balance sheet and cash flow results were mixed. Operating cash flow improved sharply to $8.1 billion from $5.8 billion, but capital returns were heavy: dividends of $1.29 billion and roughly $4.0 billion of buybacks in 2014, plus a $2.0 billion accelerated share repurchase in January 2015 and a 27% dividend increase to $0.35 per quarter. Leverage rose modestly, with a $521 million loss on early debt extinguishment from a $2.0 billion tender offer, and long-term debt was $11.7 billion, down from $12.8 billion after repayments. Management reports the company holds investment-grade ratings (Baa1/BBB+), but the filing discloses several material legal exposures, including the Lauriello insurance class action seeking about $3.2 billion in damages and multiple False Claims Act qui tam suits. The main investor questions are whether PBM margin pressure and generic-drug reimbursement pressure will erode the retail profit engine, whether the Coram and Specialty Connect investments will deliver returns, and whether aggressive capital returns can be sustained alongside the legal and regulatory risks. The filing's own risk factors flag that PBM client renewals, Medicare Part D sanctions history, and potential changes to AWP pricing benchmarks could all affect future earnings.
Feb 10, 2015
2013
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2013
CVS Caremark's fiscal 2013 10-K shows a company that grew revenue and earnings while returning significant capital to shareholders. Net revenues rose 3.0% to $126.8 billion, and operating profit increased 11.5% to $8.0 billion. Net income attributable to CVS Caremark reached $4.6 billion, or $3.74 per diluted share, up from $3.02 in 2012. Growth was driven by the Pharmacy Services segment (revenue up 3.8%, operating profit up 15.2%) and the Retail Pharmacy segment (revenue up 3.1%, operating profit up 11.2%), helped by rising generic dispensing rates, specialty drug cost inflation, and same-store pharmacy sales growth of 2.6%. Front-store same-store sales declined 0.5%, reflecting weaker customer traffic. Cash generation and capital allocation are central to the investment case. Operating cash flow fell to $5.8 billion from $6.7 billion, mainly because of a $2.2 billion increase in receivables tied to timing of CMS Medicare Part D payments. Management repurchased 66.2 million shares for about $4.0 billion, paid $1.1 billion in dividends, and raised the quarterly dividend 22% to $0.275. Total debt rose to about $13.4 billion, with long-term debt at $12.8 billion, after issuing roughly $4.0 billion in senior notes to fund the January 2014 acquisition of Coram LLC for about $2.1 billion. Shareholders' equity was essentially flat at $37.9 billion. Key risks include continued reimbursement pressure from PBM clients and payors, margin compression in the PBM business, regulatory exposure under the Affordable Care Act and Medicare Part D, and a sizable legal docket. The most material matters include the Lauriello insurance-coverage class action seeking about $3.2 billion in damages, the In Re Pharmacy Benefit Managers Antitrust Litigation, a pending OIG settlement discussion on Medicaid claims processing, and a $20 million SEC settlement that was fully reserved. Management also flagged a potential shift in lease accounting that could materially affect the balance sheet.
Feb 11, 2014
2012
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2012
CVS Caremark's 2012 10-K reports a year of strong growth in both segments. Net revenues rose 15% to $123.1 billion, gross profit grew 9.5% to $22.5 billion, and operating profit increased 14% to $7.2 billion. Net income attributable to CVS Caremark reached $3.9 billion, or $3.03 per diluted share, up from $2.57 in 2011. Growth was driven largely by new Pharmacy Services client starts, Medicare Part D expansion, drug cost inflation, and share gains in Retail Pharmacy, which benefited from the Express Scripts–Walgreens network impasse. Gross margin compressed, falling to 18.3% of revenue from 19.2%, because the mix shifted toward the lower-margin Pharmacy Services segment, which earns about 5.2% gross margin versus roughly 30% in Retail. Cash generation and capital returns were strong. Operating cash flow was $6.7 billion, and the company repurchased about $4.3 billion of stock, retiring 95 million shares. The board also raised the quarterly dividend 38% to $0.225 per share, an annual rate of $0.90. Long-term debt was $9.1 billion, and the company refinanced about $1.3 billion of higher-coupon notes, which produced a $348 million pre-tax loss on early extinguishment of debt. Investors should weigh several risks. The company faces a SilverScript Medicare Part D sanction imposed by CMS effective January 15, 2013, which limits enrollment and marketing. Numerous government investigations and qui tam suits remain open, including a Texas Medicaid matter, a multi-state investigation, and an Alabama class action seeking about $3.2 billion. Reimbursement pressure from generic pricing, the proposed Medicaid FUL changes, and the ongoing pricing benchmark transition from AWP also weigh on margins.
Feb 15, 2013
2011
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2011
CVS Caremark's FY2011 10-K (filed February 17, 2012) shows a company that grew revenue strongly but saw profit growth stall and margins compress. Net revenues rose 11.8% to $107.1 billion, driven largely by the new Aetna PBM contract and the April 2011 acquisition of Universal American's Medicare Part D business for about $1.3 billion. Gross profit grew only 1.7% to $20.6 billion, and gross margin fell to 19.2% from 21.1%, reflecting the mix shift toward the lower-margin Pharmacy Services segment, whose gross margin dropped to 5.6% from 7.0%. Net income attributable to CVS Caremark rose about 1% to $3.46 billion, or $2.57 per diluted share, and was flattered in prior years by tax benefits. Operating profit grew 3.1% to $6.33 billion. Retail Pharmacy remains the profit engine, with segment operating profit up 8.2% to $4.9 billion and same-store sales up 2.3%, while Pharmacy Services operating profit fell about 6% to $2.2 billion. Cash generation was strong, with operating cash flow of $5.9 billion, up from $4.8 billion, and free cash flow after $1.9 billion of capex of roughly $4.0 billion. The company returned substantial capital: $3.0 billion of buybacks, including the $1.0 billion Barclays ASR, and dividends were raised to $0.1625 quarterly, an annualized $0.65. Long-term debt rose to $9.2 billion, and the company remains rated Baa2/BBB+. Investors should weigh several risks disclosed in the filing: pressure on PBM gross margins from client demands and the reduced ability to earn retail "differential" or "spread" under CMS rules; proposed Medicaid reimbursement changes (FUL at 175% of AMP) whose impact is not yet quantifiable; the pending Express Scripts–Medco merger, which could reshape the competitive landscape; the phase-out of the retiree drug subsidy tax deductibility in 2013; and a material legal docket, including the Texas qui tam case, the PBM antitrust litigation, securities class actions, and government investigations, though management does not expect these to be material.
Feb 17, 2012
2010
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2010
CVS Caremark's FY2010 10-K shows a company that remains the largest U.S. pharmacy health care provider, with 2010 net revenues of $96.4 billion, down 2.3% from $98.7 billion in 2009, while net income attributable to CVS Caremark fell 7.3% to $3.4 billion ($2.49 diluted EPS vs. $2.55). The revenue decline was driven by the Pharmacy Services segment (down 6.4%), which lost several large client contracts effective January 1, 2010 and saw Medicare Part D covered lives shrink after the competitive bidding process; the Retail Pharmacy segment grew 3.6%, with same-store sales up 2.1%. Gross margin held roughly flat at 21.0% of revenue, but Pharmacy Services gross profit fell 12.6%, reflecting loss of the retail "differential" or "spread" under a new CMS rule, pricing compression on a large client renewal, and the shift to lower-margin generics. Note that 2009 and 2010 earnings were both helped by previously unrecognized tax benefits ($47 million in 2010 and $167 million in 2009), so underlying growth is weaker than the headline figures suggest. Cash generation was solid, with operating cash flow of $4.8 billion, up from $4.0 billion, and capital expenditures of $2.0 billion. Management returned capital through $1.5 billion of share repurchases (completing the 2009 program) and dividends that were raised 15% in January 2010 and then 43% in January 2011 to $0.125 quarterly. A new $2.0 billion repurchase authorization was in place but unused at year-end. Long-term debt was $8.7 billion, with the balance sheet carrying $25.7 billion of goodwill and $9.8 billion of intangibles, and debt ratings of Baa2 (stable) and BBB+ (negative outlook). Forward-looking items include the pending $1.25 billion acquisition of Universal American's Medicare Part D business, expected to close by Q2 2011; a CEO transition from Thomas Ryan to Larry Merlo effective March 1, 2011; and an industry-wide shift away from AWP pricing benchmarks, with FDB discontinuing AWP in September 2011. Litigation and regulatory exposure is a notable investor focus. Matters include a qui tam False Claims Act suit over Medicaid claims processing (with the Texas AG also pursuing related claims), a putative class action seeking roughly $3.2 billion in damages over insurance coverage misrepresentation, multidistrict PBM antitrust litigation, a multistate FTC-led antitrust investigation involving 24 states, and a $75 million civil penalty plus forfeiture related to pseudoephedrine sales. Consistent with the filing, the company describes its exposure as not expected to have a material adverse effect, though it acknowledges that outcomes cannot be predicted with certainty.
Feb 18, 2011
2009
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2009
CVS Caremark Corporation's FY2009 10-K shows a company that grew revenue and earnings through a combination of acquisitions and organic growth while returning cash to shareholders. Net revenues rose 12.8% to $98.7 billion (from $87.5 billion), driven largely by the October 2008 Longs Drug Stores acquisition, which added roughly $6.6 billion. Operating profit increased 6.5% to $6.4 billion, and diluted EPS rose 17% to $2.55 (from $2.18), helped by a one-time $167 million tax benefit from the expiration of statutes of limitation and settlements with tax authorities. Excluding that benefit, the effective tax rate would have been about 40.1% rather than 37.3%, so underlying earnings growth was more modest than headline figures suggest. The Retail Pharmacy segment (about 56% of revenue) is the profit engine, with 7,025 stores and 13% revenue growth, while the Pharmacy Services (PBM) segment is margin-pressured: gross margin fell to 7.5% from 8.1%, reflecting client renewals at lower rates, rebate sharing, and the Medicare Part D 'differential' rule effective 2010. Management flagged that a small number of large PBM clients chose not to renew for 2010, and the top 10 clients are expected to represent about 29% of revenue, so client concentration and renewal risk are material going forward. Balance sheet and capital allocation: the company repurchased about $2.5 billion of stock in 2009, completed the $2.0 billion 2008 program, and launched a new $2.0 billion program in November 2009. Operating cash flow was $4.0 billion against $2.5 billion of capex. Long-term debt is $8.8 billion (total debt about $11.2 billion) with ratings of Baa2/BBB+ (S&P outlook negative). Significant legal exposure includes a Texas Medicaid qui tam case, an OIG subpoena and Texas AG civil investigative demands, FTC and DEA investigations, and a securities class action; management believes none will be material, but the outcomes are uncertain. Subsequent to year-end, the board approved a 15% dividend increase to $0.0875 per quarter.
Feb 26, 2010
2008
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2008
CVS Caremark's 2008 Form 10-K reports a year of strong earnings growth, driven by the 2007 Caremark Merger and the October 2008 Longs Drug Stores acquisition. Net revenues rose 14.6% to $87.5 billion, operating profit increased 26.1% to $6.0 billion, and diluted EPS reached $2.18 (or $2.27 from continuing operations), compared with $1.92 in 2007. Note that fiscal 2008 contained 368 days because of a change in fiscal year-end to December 31, so year-over-year comparisons are modestly flattered. The Retail Pharmacy segment (about 56% of revenue) improved operating margin to 7.1% from 6.0%, helped by generic mix, front-store gains, and purchasing synergies. The Pharmacy Services segment is structurally lower-margin, with gross margin compressing to 8.1% from 8.6% as clients took larger shares of rebates, mail penetration fell to 22.9%, and new or renewed client contracts were priced at lower rates, which management expects to pressure 2009 gross profit. Cash generation was solid, with operating cash flow of $3.9 billion, but investing outflows of $4.6 billion reflected the Longs deal and capital spending. Long-term debt is $8.1 billion, and the company rated Baa2/BBB+. Key risks for investors include declining drug utilization during the 2008-2009 recession, Medicare Part D margin dilution, AWP pricing benchmark changes, pending PBM antitrust and qui tam litigation (including a claim seeking about $3.2 billion in the Lauriello case), and integration risk from Longs. The company also disclosed a 15% dividend-related signal through a 10.5% increase to the quarterly dividend, and a $2.0 billion share repurchase program that is delayed until the second half of 2009.
Feb 27, 2009
2007
CVS HEALTH Corp Annual Report, Year Ended Dec 29, 2007
CVS Caremark's fiscal 2007 10-K, filed February 27, 2008, reflects a transformative year driven by the March 22, 2007 merger with Caremark Rx, Inc. The combined company reported net revenues of $76.3 billion, up 74% from $43.8 billion in 2006, and net earnings of $2.64 billion, or $1.92 per diluted share, up from $1.60. Operating profit rose to $4.79 billion from $2.44 billion. Gross profit benefited from roughly $400 million in purchasing and operating synergies realized in 2007, with management expecting purchasing synergies to grow substantially in 2008 as the full-year merger benefit takes hold. Much of the revenue jump is attributable to the Pharmacy Services segment, which added about $26.5 billion of revenue from Caremark, though the lower-margin gross accounting for certain PBM retail network contracts compressed that segment's gross margin to 8.6% from 12.4%. The balance sheet expanded sharply, with total assets rising to $54.7 billion from $20.6 billion. Goodwill increased to $23.9 billion and intangible assets to $10.4 billion, and long-term debt grew to $8.3 billion from $2.9 billion, financed largely by $4.5 billion in new notes and ECAPS issued in 2007 and the special cash dividend paid to Caremark shareholders. Equity swelled to $31.3 billion as share issuance for the merger offset the $5.4 billion of share repurchases completed through a $5.0 billion program, which management states has been substantially completed pending final settlement of the November accelerated share repurchase. Operating cash flow nearly doubled to $3.2 billion. Investors should weigh the significant risk profile disclosed. Key concerns include the company's dependence on PBM client renewals (about one-third of the PBM base renews annually), margin pressure from generic drug pricing and rising client demands, uncertainty around Medicare Part D economics as risk corridors change in 2008, and the AWP pricing benchmark litigation. The filing also details extensive legal exposure, including a Medicaid-related qui tam suit, ERISA fiduciary claims, a $3.2 billion-claim Alabama class action, antitrust suits over pharmacy networks, and a Rhode Island corruption-related investigation. The company describes its debt ratings as Baa2 and BBB+, investment grade, with management expecting to maintain that status.
Feb 27, 2008
2006
CVS HEALTH Corp Annual Report, Year Ended Dec 30, 2006
CVS Corporation's fiscal 2006 10-K (fiscal year ended December 30, 2006) shows a company that grew substantially, with net revenues of $43.8 billion (up 18.4% from $37.0 billion) and net earnings of $1.37 billion, or $1.60 per diluted share (up from $1.45). Growth was driven largely by the June 2006 acquisition of roughly 700 standalone drugstores from Albertsons for $4.0 billion, though the company reported that excluding the acquired business, revenues still rose about 10.4%. Same-store sales increased 8.2% overall, with pharmacy same-store sales up 9.1%. Gross margin expanded to 27.3% from 26.8%, while operating expenses rose to 21.7% of revenue, partly due to SFAS 123(R) stock compensation and integration costs. Interest expense nearly doubled to $215.8 million, reflecting the debt used to finance the acquisition, and long-term debt rose to $2.87 billion. The dominant strategic event is the proposed merger with Caremark Rx, a pharmacy benefit manager, structured as a merger of equals in which Caremark shareholders receive 1.670 CVS shares per Caremark share. The filing discloses a competing unsolicited offer from Express Scripts, which Caremark's board rejected, a $6 per share special dividend to Caremark holders, and a planned 150 million share accelerated buyback after closing. The closing was expected in Q1 2007 but was subject to shareholder votes that had been delayed by Delaware litigation, and the filing notes a $675 million termination fee payable to Caremark under certain circumstances. Investors should weigh the transformative upside against integration risk, purchase-accounting charges, and the uncertainty surrounding Medicare Part D, generic reimbursement pressure, and pending regulatory and legal matters, including an SEC inquiry into a 2000 transaction and a Rhode Island investigation. The balance sheet remains sound, with shareholders' equity of $9.9 billion, operating cash flow of $1.74 billion, and investment-grade credit ratings (Baa2/BBB+), although the company's leverage increased materially. The dividend was raised 26% to an annualized $0.195 per share for 2007, signaling management's confidence in cash generation.
Feb 27, 2007
2005
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 2005
CVS Corporation's fiscal 2005 10-K shows a retail drugstore and pharmacy benefit management (PBM) company that grew sharply, driven largely by the July 2004 Eckerd acquisition. Net sales rose 21.0% to $37.0 billion, and net earnings increased 33.3% to $1.22 billion ($1.45 per diluted share). Operating profit grew to $2.02 billion from $1.45 billion, though the 2005 results include a $52.6 million tax reserve reversal, which management excludes from its comparable figures (comparable 2005 diluted EPS of about $1.39). Excluding the Eckerd acquisition, total sales grew roughly 8.4%. Same-store sales rose 6.5%, with pharmacy same-store sales up 7.0% and front-store up 5.5%. The company's balance sheet strengthened, with shareholders' equity rising to $8.33 billion and long-term debt falling to $1.59 billion from $1.93 billion. Operating cash flow increased to $1.61 billion from $914 million. The main forward-looking items are the pending $2.93 billion purchase of roughly 700 Sav-on and Osco stores from Albertson's, plus a $1.0 billion real estate purchase, expected to close in mid-2006 and to be funded partly through sale-leasebacks. Standard & Poor's placed CVS's long-term debt on negative outlook, and Moody's placed its ratings under review for possible downgrade. Management expects the ratings to remain investment grade. Investors should weigh several risks. Medicare Part D (effective January 2006) is expected to reduce pharmacy gross margin rates, and the Deficit Reduction Act will cut Medicaid reimbursement for generic drugs starting in 2007. The company also disclosed an SEC informal inquiry into a 2000 barter transaction involving plush toy inventory, which led to the resignation of the Controller and Treasurer. The CFO is serving as interim Principal Accounting Officer. Management does not expect these matters to be material.
Mar 14, 2006
2005
CVS HEALTH Corp Annual Report, Year Ended Jan 1, 2005
CVS Corporation's fiscal 2004 10-K (fiscal year ended January 1, 2005) shows a company that grew sharply through the July 31, 2004 acquisition of 1,268 Eckerd drugstores and Eckerd Health Services from J.C. Penney for a purchase price of $2.15 billion. Net sales rose 15.1% to $30.6 billion, operating profit rose 2.2% to $1.45 billion, and net earnings increased 8.4% to $918.8 million, or $2.20 per diluted share. Comparable internal figures excluding a $65.9 million non-cash lease accounting adjustment and a $60.0 million tax reserve reversal were $899.3 million, or $2.15 per diluted share, which indicates underlying earnings growth of roughly 6%. Operating margins were pressured by integration costs and lower sales per store at the acquired stores, which management says had declined significantly in the year before the deal. The balance sheet and cash flow picture weakened. Net debt rose to $2.45 billion from $233 million, long-term debt increased to $1.93 billion, and operating cash flow fell to $914 million from $969 million, driven by inventory build for the acquired stores. Capital expenditures reached $1.35 billion, and management plans more than $1.4 billion in 2005 spending, including 275 to 300 new or relocated stores. Management also raised the quarterly dividend 9% to $0.0725 per share. Investors should weigh the growth from the Eckerd deal against integration risk, rising leverage, and several legal matters. These include a securities class action scheduled for trial on May 9, 2005, an ERISA suit, a shareholder derivative suit, state and federal investigations, and contingent lease guarantees of about $517 million tied to former subsidiaries. The company also noted growing pressure from mail order channels and third-party payors on pharmacy margins.
Mar 16, 2005
2004
CVS HEALTH Corp Annual Report, Year Ended Jan 3, 2004
CVS Corporation's fiscal 2003 10-K (53 weeks ended January 3, 2004) shows a company growing profitably in a competitive retail pharmacy market. Net sales rose 10.0% to $26.6 billion, aided by a 53rd week worth $530.8 million; on a comparable 52-week basis, sales grew 7.8%. Net earnings increased 18.2% to $847.3 million, or $2.06 per diluted share, versus $1.75 in 2002. Operating profit rose to $1.42 billion from $1.21 billion, and gross margin widened to 25.8% of sales from 25.1%, helped by generic drug mix, a stronger front-store mix, and an early flu season. The 2002 comparison is also flattered by no restructuring charge, since the 2001 figures included a $352.5 million pre-tax restructuring charge. Investors should weigh several pressures alongside the growth. Pharmacy now makes up 68.8% of sales and carries lower margins than front-store merchandise, and third-party payors account for 93.2% of pharmacy sales. Management warned that continued shifts to mail order, reimbursement cuts from payors and state Medicaid programs, and generic conversion could slow sales growth. Operating expenses rose to 20.5% of sales from 20.1%, and management expects the improvement in inventory losses to be smaller in 2004. Cash flow from operations fell to $968.9 million from $1.20 billion, mainly because of higher receivables, while capital spending reached $1.12 billion, which the company plans to keep above $1.1 billion in 2004. The balance sheet remains conservative. Net debt fell to $233.1 million, long-term debt dropped to $753.1 million, and shareholders' equity rose to $6.02 billion. The company rates A2/A at Moody's and S&P, though both outlooks are negative. Legal and contingent exposures include a consolidated securities class action that management calls without merit, an ongoing Rhode Island state investigation, and guarantees on about 706 former store leases with an estimated settlement exposure of $592 million. Management says the guarantees are indemnified by purchasers and are not expected to have a material adverse effect. The dividend is set to rise 15% to $0.265 per quarter in 2004.
Mar 12, 2004
2002
CVS HEALTH Corp Annual Report, Year Ended Dec 28, 2002
CVS Corporation's 2002 Form 10-K (fiscal year ended December 28, 2002, filed March 18, 2003) reports a year of strong profit recovery following the 2001 strategic restructuring. Net sales rose 8.7% to $24.2 billion, driven by an 11.2% increase in pharmacy sales, while front store sales grew 3.8%. Operating profit nearly doubled from the restructuring-depressed 2001 level to $1.21 billion (5.0% of sales), and diluted EPS rose to $1.75 from $1.00. Excluding nonrecurring items in 2001, operating profit grew about 8% and net earnings grew roughly 12% per diluted share, indicating that underlying growth was real but more modest than the headline comparison suggests. The balance sheet and cash flow picture improved meaningfully. Operating cash flow rose to $1.20 billion from $681 million, funding $1.11 billion in capital expenditures, mostly for new stores and remodels, and the company ended the year with $700 million in cash. Net debt fell to $413 million from $836 million. Management plans over $1 billion in 2003 capital spending, including 150-175 new stores, and a new Texas distribution center. Gross margin continued to compress, falling to 25.1% from 25.6%, as lower-margin pharmacy sales and third-party reimbursement pressure outpaced front store growth. Management also flagged risks from state Medicaid reimbursement cuts, generic substitution, and a continuing inventory-loss problem. The filing also discloses a pending securities class action alleging fraud between February and October 2001, which management calls without merit. Investors should weigh the company's market-leading store footprint, loyalty program, and improving returns against margin pressure from the PBM and third-party payer mix, and the reliance on continued store expansion to drive growth.
Mar 18, 2003
2000
CVS HEALTH Corp Annual Report, Year Ended Dec 30, 2000
CVS Corporation's fiscal 2000 10-K (fiscal year ended December 30, 2000) shows a retailer that grew sales and earnings strongly while keeping its balance sheet conservative. Net sales rose 11.0% to $20.1 billion, with same-store sales up 10.9%. Pharmacy same-store sales grew 17.7%, and pharmacy now makes up 63% of sales. Net earnings increased to $746.0 million, or $1.83 per diluted share, up from $1.55 in 1999. Excluding a one-time $19.2 million pre-tax litigation gain in 2000 and 1998 merger-related charges, comparable diluted EPS was $1.80 versus $1.55 in 1999, a 16% increase. Operating profit reached $1.32 billion, and operating cash flow rose to $780.2 million. Growth is driven by the managed care and prescription business, an aging population, and the company's store expansion. CVS operated 4,133 stores at year-end and plans to open about 300 more in 2001, with a goal of roughly 80% freestanding locations over the long term (currently 39%, targeting 44% by end of 2001). The company also expanded into specialty pharmacy through the Stadtlander acquisition for $124 million in cash, and it reports that it uses no derivatives. Investors should note the structural margin pressure: gross margin slipped to 26.7% from 26.9% as lower-margin third-party prescription sales grew to 89% of pharmacy sales, and management warns it may not sustain its current sales growth if it drops more unprofitable third-party programs. Balance sheet and capital allocation remain sound. Long-term debt was $536.8 million against shareholders' equity of $4.30 billion, and commercial paper of $589.6 million was supported by credit facilities. The company repurchased $163.2 million of its stock under a $1 billion authorization, and the dividend was $0.23 per share annually. Contingent exposure is notable: CVS guarantees leases on about 1,300 former stores, which would cost roughly $876 million to settle if all purchasers became insolvent, though management views that as highly unlikely and indemnified. Overall the filing presents a strong growth story with the main risks coming from pharmacy reimbursement pressure and reliance on continued store expansion.
Mar 19, 2001
2000
CVS HEALTH Corp Annual Report, Year Ended Jan 1, 2000
CVS Corporation's fiscal 1999 10-K (53 weeks ended January 1, 2000) shows a company at a strong point in its growth and integration cycle. Net sales rose 18.5% to $18.1 billion, with same-store sales up 12.5% and pharmacy same-store sales up 19.4%. Operating profit reached $1.14 billion, up from $752 million, and net earnings climbed to $635.1 million, or $1.55 per diluted share, compared with $0.95 in 1998. Comparable figures, which strip out 1998 and 1997 merger and restructuring charges, show comparable earnings growth of 24.5%. The 53rd week contributed to the sales increase; excluding it, net sales grew 16.0%. Cash flow from operations improved to $658.8 million from $221.0 million, supported by higher earnings and better working capital management. The balance sheet is solid but has become more leveraged in short-term funding. Total assets were $7.28 billion and shareholders' equity was $3.68 billion. Short-term borrowings (commercial paper) were $451 million, and long-term debt was $558.5 million, including $300 million of 5.5% senior notes issued in February 1999. Liquidity is supported by a $670 million five-year credit facility and a $530 million 364-day facility. Capital expenditures were $493.5 million, and the company plans to open roughly 400 to 450 stores in fiscal 2000, with a long-term goal of 80% freestanding locations, up from 33% today. Investors should weigh several risks. Pharmacy sales, now 59% of revenue, carry lower gross margins because of growing third-party (managed care) reimbursement pressure, and comparable gross margin has drifted down from 27.6% in 1997 to 26.9% in 1999. Management has said it may drop unprofitable third-party programs, which could slow sales growth. The company also guarantees roughly 1,400 former store leases, with an estimated worst-case settlement exposure of about $1.0 billion, although purchasers indemnify CVS. Management reports no material pending litigation and does not use derivatives.
Mar 31, 2000
1998-A
CVS HEALTH Corp Annual Report (Amendment), Year Ended Dec 31, 1998
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 million 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 $0.19 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 million, 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 million 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.
Nov 17, 1999
1998
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 1998
CVS Corporation's 1998 Form 10-K (filed March 31, 1999) shows a company that grew sharply in revenue but is still digesting two large pooling-of-interests mergers. Net sales rose 11.1% to $15.3 billion, and the company says it is the largest U.S. drugstore chain by store count (4,122 stores in 24 states plus D.C.). Pharmacy now makes up 58% of sales, and third-party payors account for 84% of pharmacy sales, a mix that management notes is steadily compressing gross margin (comparable gross margin fell to 27.1% from 27.6%). Reported operating profit was $772.2 million, but after excluding the $158.3 million Arbor merger charge and the $10.0 million inventory markdown, comparable operating profit rose 20.7% to $940.5 million (6.2% of sales). Reported diluted EPS was $0.98, versus $1.26 on a comparable basis. Note that the Revco and Arbor mergers were accounted for as poolings, so prior-year figures are restated and year-over-year comparisons are affected by one-time charges in both 1997 and 1998. Balance sheet and liquidity look solid. Shareholders' equity grew to $3.11 billion, and total debt to capitalization was 25.4%. Operating cash flow was only $221.0 million, however, because inventory rose $315 million and accounts receivable rose $198 million. Short-term borrowings increased to $771.1 million, funded partly by commercial paper, and in February 1999 CVS issued $300 million of 5.50% senior notes due 2004 to repay commercial paper. Management says the company does not use derivatives and has no material market risk exposure. Remaining risks include a $1.1 billion contingent lease-guarantee exposure tied to about 1,600 former stores, pending drug-pricing antitrust litigation where CVS may recover a significant amount, and Year 2000 remediation, which is about 85% complete for critical IT systems. Leadership is also changing: Thomas Ryan becomes Chairman and CEO and Charles Conaway becomes President and COO effective April 14, 1999. For investors, the central questions are whether the Arbor and Revco integrations deliver the promised synergies, whether pharmacy-driven margin pressure can be offset by front-store and relocation gains, and whether operating cash flow catches up with reported earnings.
Mar 31, 1999
1995
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 1995
Important note: the document provided is Melville Corporation's Form 10-K for fiscal 1995, filed March 29, 1996, not a CVS Health Corp filing. CVS was Melville's largest division, and the filing describes Melville's plan to split into three public companies: a chain drug holding company built around CVS, a footwear company (Meldisco, Footaction, Thom McAn), and a toy company (Kay-Bee). The analysis below covers Melville as filed. Fiscal 1995 was a severe loss year. Melville reported a net loss of $657.1 million, or $6.41 per share, against net earnings of $307.5 million ($2.75 per share) in 1994. The loss was driven by $936.8 million in restructuring and asset impairment charges, the $41.96 million after-tax cumulative effect of an accounting change (expensing software costs and early adoption of SFAS 121), and operating losses at the Marshalls and Thom McAn businesses. Management says per-share earnings excluding these items would have been $1.26. Net sales from continuing operations were $9.69 billion, up from $9.45 billion, and same-store sales rose 2.2%. Total company sales including footwear were $11.5 billion. The balance sheet and dividend changed substantially. Shareholders' equity fell to $1.55 billion from $2.38 billion, and book value per share fell to $14.73 from $22.54. The board cut the quarterly dividend from $0.38 to $0.11 per share, effective with the restructuring. Liquidity remains manageable: operating cash flow was $345.5 million, capital expenditures were $395.0 million, and year-end short-term borrowings were just $52.0 million. The company also sold Marshalls to TJX for about $600 million in November 1995 and agreed in March 1996 to sell Kay-Bee to Consolidated Stores for about $315 million. The separations are targeted for summer 1996, with the spin-off of the footwear company subject to a tax-free ruling and Kmart consent.
Mar 29, 1996
1994
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 1994
Important note: this filing is the 10-K of Melville Corporation (NYSE: MES) for fiscal 1994, not CVS Health. CVS was a Melville division (1,328 drugstores, about 38% of 1994 sales), and the company now known as CVS Health traces its roots to this business. The analysis below covers Melville as a whole. Melville reported 1994 net sales of $11.29 billion, up 8.1% from $10.44 billion, with same-store sales up 3.3%. Profitability weakened. Operating profit fell 2.0% to $610.7 million, net earnings dropped 7.3% to $307.5 million, and EPS declined 8.3% to $2.75 from $3.00. Results were hurt by weak apparel and footwear performance at Marshalls, Wilsons and Thom McAn, higher costs tied to lease guarantees on divested businesses (Chess King and Freddy's), and gross margin pressure as the mix shifted toward lower-margin prescription drugs. Management said EPS excluding the real estate costs would have been $2.86. CVS, Kay-Bee and Linens 'n Things were the growth drivers. The balance sheet remained solid but borrowing rose. Shareholders' equity was $2.38 billion (book value $22.54 per share), and long-term obligations were 12.8% of total capitalization. Short-term borrowings (commercial paper) rose to $200 million from $90 million to fund a $279.5 million inventory increase and $421.4 million of capital spending, which management estimates at $325 million for 1995. Operating cash flow of $498.4 million covered the $225.5 million in dividends. The company also disclosed a comprehensive strategic review of its business mix, which signals possible portfolio changes ahead.
Mar 29, 1995
1993
CVS HEALTH Corp Annual Report, Year Ended Dec 31, 1993
Important discrepancy: the filing provided is Melville Corporation's Form 10-K for the fiscal year ended December 31, 1993 (Commission File No. 1-1011, Rye, NY). It is not a CVS Health Corp filing. CVS is a banner within Melville's Prescription Drugs, Health and Beauty Aids segment, so this analysis covers Melville, the registrant. The analysis should not be read as CVS Health's own results. Melville's 1993 net sales were flat at $10.44 billion (1992: $10.43 billion), with same-store sales up only 0.1%. Operating profit rebounded to $623.3 million from $360.9 million, but the 1992 figure included a $347.0 million pre-tax strategic realignment charge. Net earnings rose to $331.8 million, or $3.00 per share, versus $1.13 in 1992. Excluding the 1992 charges, EPS would have been about $3.50 in 1992, so underlying 1993 earnings declined. Management attributed the weakness to disappointing sales, heavier apparel markdowns, and a shift in mix toward lower-margin prescription sales, which pressured gross margin. Earnings were helped by a $10.0 million LIFO benefit from a change in retail price index methodology. Balance sheet and cash flow were solid. Cash and equivalents were $81.0 million, down from $145.1 million. Operating cash flow was $419.7 million and capital expenditures were $386.7 million, with 1994 capex estimated at $395.0 million. Commercial paper of $90.0 million was outstanding at year end, against a peak of $875.0 million during the year. Shareholders' equity was $2.25 billion, and long-term obligations were 14.0% of total capitalization. The company paid $1.52 per common share in dividends and operated 7,282 stores, down from 8,213, after closures and divestitures under the 1992 realignment program.
Mar 31, 1994