A Strategic Management Case Study on
CVS Caremark Corporation
By: Carter Vaillancourt, Megan Land, and Emily Michaud
UMFK
Overview
Company Overview
•A brief history of CVS
•Existing Mission and Vision
•Existing Strategies
•New Mission and Vision
External Assessment
•Industry Analysis
•Opportunities and Threats
•EFE Matrix
•CPM Matrix
Internal Assessment
•Organizational Structure
•Strengths and Weaknesses
•Financial Condition
•IFE Matrix
Strategy Formulation
•SWOT Matrix
•Space Matrix
•Grand Strategy Matrix
•Matrix Analysis
•QSPM Matrix
Evaluation
Balanced Scorecard
CVS Caremark Update
Implementation
•Projected Financials
Strategic Plan for the
Future
•Objectives
•Strategies
Company Timeline
 The CVS name was
used for the first
time in 1964. That
year, they had 17
retail locations, and
40 stores only five
years later
1960s
1970s
 By 1974, CVS
had 232 stores
and sales of
$100 million
 The chain had more
than 400 stores by
1981. Sales reached
$1 billion in 1985,
partly due to the
pharmacies being
added to many of
CVS's older stores
1980s
1990s
 In 1994, CVS started
PharmaCare
Management
Services.
 In 1999, CVS
acquired Soma.com,
the first online
pharmacy, and
renamed it CVS.com
 In 2004, CVS
purchased 1,268
Eckerd drug stores
and Eckerd Health
Services, a
PBM/mail-order
pharmacy business,
from J. C. Penney
20002005
20062010
 On November 1, 2006, CVS
announced that it was
entering into a purchase
agreement with Nashvillebased Caremark Rx Inc., a
pharmacy benefits manager
 On August 12, 2008, CVS
Pharmacy announced that it
would acquire Longs Drugs
for $2.9 billion
CVS Caremark Segments
2010 CVS Caremark Retail Segment Revenue Break Down
2009
2010
Existing Vision Statement
We strive to improve the
quality of human life.
Existing Mission Statement
We provide expert care and innovative
solutions in pharmacy and health care
that are effective and easy for our
customers.
Existing Strategies
• Use Minute Clinic locations and Specialty pharmacy division
to lower cost while improving the health of those we serve
• Increase CVS Caremark leadership in and contribution to the
areas of pharmacy services and healthcare
Proposed Vision Statement
CVS Caremark’s vision is to improve the
quality of life through convenient and
cost efficient offerings.
Proposed Mission Statement
At CVS Caremark our mission is to provide quality products and services through
our pharmaceuticals and consumer products (2). We strive to be the number
one provider in the United States (3) by investing not only in our company (5)
and technological advances (4) but also in the communities in which we serve
(8). Whether our customers are new to this world our are veterans, (1) we know
that our company can provide them with the newest and most effective
products and services, while promoting the healthy communities in which they
live. Through our valued employees (9), CVS is able to provide quality services
and quality products (7).
External Analysis
Operating Expenses as a % of Revenue
Gross Margin as a % of Revenue
Competitive Analysis
U.S Pharmacies 2010
Rx Same-Store-Sales Trends
Opportunities
1.
2.
3.
4.
5.
6.
7.
8.
9.
Universal Health Care and economy recovery, $10 trillion by 2020
Imminent introduction of generic brands lowering the cost
Over the next five years, roughly $50 billion branded drugs will lose patent
protection
With healthcare reform slowly coming into effect, 32 million Americans
previously without coverage will now have some short sort of coverage.
People 65 years of age or older fill more than 25 prescriptions annually on
average, 3 times the national average.
As baby boomers age, approximately 70 million Americans will turn 65 in the
next 20 years
It is estimated that by 2014, 8 out of the top 10 drugs in the U.S. will be specialty
drugs, where expenditures are expected to rise to $100 billion.
Medicare part D market is expected to grow 8.5% annually from 2010 to 2020
Global pharmaceutical industry is expected to grow, especially Brazil, India,
Russia, and China, which is expected to be the 3rd largest market in 2011
Threats
1.
2.
3.
4.
5.
6.
7.
8.
9.
It is estimated that there could be a dearth of 200,000 healthcare
professionals and 800,000 nurses by 2020
Potential government intervention in health care after election in 2012
Imminent introduction of generic brands lowering the margin
CVS’ is behind Wal-Mart by nearly $140 billion in market cap.
CVS’ additional competitor Walgreens is behind them by a market cap of
roughly $10 billion.
Walgreens increased the number of prescriptions filled in 2010 by 7.5% ,
whereas ours decreased.
In the next 5 years, 9 out of the top 10 best-selling drugs in the world
will go off patent, resulting in an expected loss of sales
Extensive regulation has increased the time from drug discovery to
approval from 6 years in the 1970s to 13.5 years in the 2000s.
Pharmaceutical companies struggle to develop new drugs as R&D costs
become high, on average between $4 billion to $11 billion per drug
CPM
CVS
Critical Success factors
Walmart
Walgreen
Weights Rating Weighted Score Rating Weighted Score Rating Weighted Score
0.0 to 1.0 1 to 4
1 to 4
1 to 4
Advertising
0.08
3
0.24
4
0.32
2
0.16
Product Quality
0.12
3
0.36
4
0.48
3
0.36
Price Competitiveness
0.10
2
0.20
4
0.40
3
0.30
Finanical Position
0.10
3
0.30
4
0.40
3
0.30
Customer Loyalty
0.14
3
0.42
4
0.56
2
0.28
Global Expansion
0.11
3
0.33
4
0.44
2
0.22
Market Share
0.07
3
0.21
4
0.28
2
0.14
Organization Structure
0.06
3
0.18
4
0.24
3
0.18
Customer Service
0.08
4
0.32
3
0.24
3
0.24
Production Capacity
0.10
3
0.30
4
0.40
3
0.30
Employee Dedication
0.04
4
0.16
3
0.12
3
0.12
Totals
1.00
3.02
3.88
2.60
Key External Factors
EFE
Weights
0.0 to 1.0
Rating
1 to 4
Weighted Score
Opportunities
Universal Health Care and economy recovery, $10 trillion by 2020
Imminent introduction of generic brands lowering the cost
0.06
0.07
4
3
0.24
0.21
Over the next five years, roughly $50 billion branded drugs will lose patent protection
With healthcare reform slowly coming into effect, 32 million Americans previously without
coverage will now have some sort of coverage.
People 65 years of age or older fill more than 25 prescriptions annually on average, 3 times the
national average
0.04
2
0.08
0.04
2
0.08
0.06
2
0.12
As baby boomers age, approximately 70 million Americans will turn 65 in the next 20 years
It is estimated that by 2014, 8 out of the top 10 drugs in the U.S. will be specialty drugs, where
expenditures are expected to rise to $100 billion
0.06
3
0.18
0.04
3
0.12
Medicare part D market is expected to grow 8.5% annually from 2010 to 2020
0.05
2
0.1
0.05
3
0.15
0
0.04
3
0.12
Potential government intervention in health care after election in 2012
Imminent introduction of generic brands lowering the margin
0.06
0.06
2
2
0.12
0.12
CVS’ is behind Wal-Mart by nearly $140 billion in market cap
0.07
3
0.21
CVS’ additional competitor Walgreens is behind them by a market cap of roughly $10 billion
0.07
4
0.28
Walgreens increased the number of prescriptions filed in 2010 by 7.5% , whereas ours decreased
In the next 5 years, 9 out of the top 10 best-selling drugs in the world will go off patent, resulting
in an expected loss of sales
Extensive regulation has increased the time from drug discovery to approval from 6 years in the
1970s to 13.5 years in the 2000s
Pharmaceutical companies struggle to develop new drugs as R&D costs become high, on average
between $4 billion to $11 billion per drug
0.05
2
0.1
0.04
2
0.08
0.05
4
0.2
0.09
4
0.36
2.87
Global pharmaceutical industry is expected to grow, especially Brazil, India, Russia, and China,
which is expected to be the 3rd largest market in 2011
Threats
It is estimated that there could be a dearth of 200,000 healthcare professionals and 800,000
nurses by 2020
Totals
1
Internal Analysis
Organizational Chart
THOMAS M. RYAN
Chairman of the Board and
Chief Executive Officer
LARRY J.
MERLO
President
and
Chief
Operating
Officer
TROYEN A.
BRENNAN,
M.D.
Executive
Vice President
and
Chief Medical
Officer
DAVID M.
DENTON
HELENA B.
FOULKES
Executive
Vice President
and
Chief
Financial
Officer
Executive
Vice President
and
Chief
Marketing
Officer
PER G.H.
LOFBERG
Executive
Vice
President
and
President
– Caremark
Pharmacy
Services
JONATHA
N C.
ROBERTS
Executive Vice
President and
Chief Operating
Officer –
Caremark
Pharmacy
Services
EVP; President,
Caremark
Pharmacy
Services
DOUGLA
S A.
SGARRO
Executive
Vice
President
and
Chief Legal
Officer
LISA G.
BISACCIA
Senior Vice
President
and
Chief
Human
Resources
Officer
EVP Internal
Operations,
Real Estate,
Retail Field,
Organizations
LAIRD K.
DANIELS
NANCY R.
CHRISTAL
Senior Vice
President –
Investor
Relations
Senior Vice
President –
Finance and
Controller and
Chief
Accounting
Officer
CAROL A.
DENALE
Senior Vice
President
and
Corporate
Treasurer
SARA J.
FINLEY
Senior
Vice
President
and
General
Counsel
STUART M.
MCGUIGAN
Senior Vice
President and
Chief
Information
Officer
CVS Worth Analysis
CVS Worth Analysis for 2010 (in millions)
Shareholder's equity - Goodwill - Intangibles 2,281
Net Income * 5
17,120
(Stock Price/EPS) * NI
45,726
# of Shares Out * Stock Price
45,822
Four Method Average
27,737
Income Statement
Balance Sheet
Balance Sheet Continued
CVS Caremark Financial Ratios
Ratio (2010)
Liquidity Ratios
Current
Quick
Leverage Ratios
Debt to total assets
Debt to equity
Long-term debt to equity
Activity Ratios
Fixed Assets Turnover
Total Assets Turnover
Inventory Turnover
Profitability Ratios
Gross Profit Margin %
EBT Margin %
Net Profit Margin %
Return on total assets %
Return on Stockholder's equity %
Price-earnings ratio
Growth Ratios
Sales Growth (5-years)
Net Income Growth (5-years Average)
Earnings per share Growth (5-year Average)
CVS
Walgreens
Wal-Mart
1.60
0.63
1.60
0.61
0.87
0.27
0.39
0.65
0.23
0.45
0.82
0.17
0.57
1.34
0.46
11.59
1.55
9.01
6.03
2.57
9.14
4.1
2.39
12.31
21.01
5.84
3.55
5.54
9.33
13.35
28.15
5.00
3.10
8.13
14.53
17.28
25.37
5.41
3.51
8.58
21.08
13.64
21.11%
22.85%
9.82%
6.04%
7.23%
6.90%
11.42%
6.88%
8.95%
Strengths
1.
2.
3.
4.
5.
6.
7.
8.
9.
CVS is the largest pharmacy health care provider in the U.S with over
7,100 pharmacies.
Gross profit as a percent of net revenues increased 21.0%
Operating expenses decreased 1.8% from 2009.
Employee base of 202,000 employees
CVS is recognized as one of the largest pharmacy benefit managers
(PBMs) in the US. Registering more than four million customers per day
Market cap increased by 5.8% from 44 billion to 47 billion in 2010
More than 65% of stores are open around the clock or offer extended
hours
Has 560 MinuteClinic locations across 26 states, easing health care
overcrowding from lack of Primary care providers.
Generates more than $11 billion in specialty pharmacy revenue annually
Weaknesses
1.
2.
3.
4.
5.
6.
7.
8.
9.
Substantial amount of outstanding debt, 11 million
Since March 2009, the Company has been named in a series of
putative collective and class action lawsuits filed in federal courts
Pharmacy services segment is showing less revenue than the retail
segment
High cost of revenue and operational expenses; 76,156, 14,092
Net interest expense increased 1.2% since 2009.
Pharmacy network claims processed decreased 12.5% in 2010 due
to the expiration of a few large client contracts.
Income from continuing operations decreased by 7.2% in 2010
Net revenues decreased by $2.3 billion in 2010
CVS shares returned 7.9% in 2010, trailing the S&P 500 Index of
12.8% return
Key Internal Factors
IFE
Weights
0.0 to 1.0
Rating
1, 2, 3 or 4
3 or 4
Weighted Score
Internal Strengths
CVS is the largest pharmacy health care provider in the U.S with over 7,100
pharmacies
Gross profit as a percent of net revenues increased 21.0%
Operating expenses decreased 1.8% from 2009
Employee base of 202,000 employees
0.08
0.06
0.04
0.03
4
4
3
3
0.32
0.24
0.12
0.09
CVS is recognized as one of the largest pharmacy benefit managers (PBMs) in
the US. Registering more than four million customers per day
Market cap increased by 5.8% from 44 billion to 47 billion in 2010
0.05
0.07
3
4
0.15
0.28
More than 65% of stores are open around the clock or offer extended hours
Has 560 MinuteClinic locations across 26 states, easing health care
overcrowding from lack of Primary care providers
0.09
3
0.27
0.07
4
0.28
Generates more than $11 billion in specialty pharmacy revenue annually
Internal Weaknesses
Substantial amount of outstanding debt, 11 million
Since March 2009, the Company has been named in a series of putative
collective and class action lawsuits filed in federal courts
0.05
3
0.15
0.05
1
0.05
0.04
2
0.08
Pharmacy services segment is showing less revenue than the retail segment
High cost of revenue and operational expenses; 76,156, 14,092
Net interest expense increased 1.2% since 2009
Pharmacy network claims processed decreased 12.5% in 2010 due to the
expiration of a few large client contracts.
Income from continuing operations decreased by 7.2% in 2010
Net revenues decreased by $2.3 billion in 2010
0.03
0.08
0.03
1
1
2
0.03
0.08
0.06
0.04
0.03
0.04
1
1
2
0.04
0.03
0.08
CVS shares returned 7.9% in 2010, trailing the S&P 500 Index of 12.8% return
0.03
2
0.06
2.64
Totals
1 or 2
1
Strategy Formulation
SO
Strengths
Expand to areas such as Latin America
and Asia. (S4, S6, O2, O3, O9)
Increase number of Minute Clinics in
areas where there is a large number of
aging population. (S5, S8, S9, O5, O6, O8)
ST
Opportunities
WO
Offer educational programs/training to
better prepare our staff to answer
customer questions. (S4, S7, T1)
Offer incentives to employees based on
customers they get to sign up for
loyalty program. (W6, O4, O5, O6)
Increase number of stores open 24 hours
by 20%. (S7, T4, T5, T6)
Expand to states/areas in the U.S. that
we currently do not operate in. (W3,
W6, W8, O1, O4)
WT
Take advantage of the expiring patents on
drugs by developing generics through
R&D. (W3, W6, W8, T6, T7, T8, T9)
Threats
Increase our food segment to increase
revenue and better compete
with Walmart and Walgreen. (W3, W7,
W8, T4, T5)
Weaknesses
Financial Strength
1
2
3
4
5
6
7
Industry
Strength
1
2
3
4
5
6
7
rating is 1 (worst) to 7
(best)
Cash Flow
Price Earnings Ratio
Earnings per Share
Working Capital
Liquidity
Net Income
Return on Assets
rating is 1 (worst) to 7
(best)
Profit Potential
Financial Stability
Resource Utilization
Productivity, capacity utilization
Market Entry
Growth Potential
Extent Leveraged
Environmental
Stability
Competitive
advantage
1
2
3
4
5
6
7
Rate of Inflation
Barriers to Enter the Market
Competitive Pressure
Price Elasticity
Demand Variability
Price Range of Competing Products
Ease of Exit from Market
rating is -1 (best) to -7
(worst)
Market Share
Product Quality
Customer Loyalty
Capacity Utilization
Technologically Advanced
Global Expansion
Product Life Cycle
6
Conservative
Total
29.0
-4.0
-3.0
-2.0
-4.0
-1.0
-4.0
-2.0
20.
ES
Total
0
1.0
1.0
2.0
4.0
3.0
7.0
5.0
FS
Aggressive
5
5.0
6.0
5.0
5.0
2.0
4.0
2.0
IS
Total
1
2
3
4
5
6
7
Space Matrix
4.0
4.0
5.0
3.0
2.0
5.0
3.0
4
3
2
1
CS
-6
-5
-4
-3
-2
-1
1
2
3
4
5
6
1
2
3
4
5
Defensive
6
ES
X Coordinate
Y Coordinate
Competitive
0.86
0.86
IS
GSM
Rapid Market Growth
Quadrant II
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration
5. Divestiture
6. Liquidation
Weak
Competitve
Position
Quadrant III
1. Retrenchment
2. Related diversification
3. Unrelated diversification
4. Divestiture
5. Liquidation
Quadrant I
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Related diversification
Quadrant IV
1. Related diversification
2. Unrelated diversification
3. Joint ventures
Slow Market Growth
Strong Competitive
Position
Matrix Analysis
Alternative Strategies
SPACE
GRAND
Forward Integration
x
x
2
Backward Integration
x
x
2
Horizontal Integration
x
x
2
Market Penetration
x
x
2
Market Development
x
x
2
Product Development
x
x
2
Related Diversification
x
x
2
Unrelated Diversification
x
Retrenchment
Divestiture
Liquidation
IE
BCG
COUNT
1
Strategic Evaluation
Product Development
• Increase number of stores open 24 hours by 20%. (Not Enough Need as of
2010)
• Offer Educational Programs/Trainings to better prepare our staff to answer
customer questions.
(Most questions of customers require answers from a Pharmacist)
• Offer incentives to employees based on customers they get to sign up for
loyalty program (Causes customers to be prompted with questions on
their fast and convenient stop at CVS)
• Take advantage of the expiring patents on drugs by developing more
Generics ( Already in this market strongly)
• Increase our food segment to increase revenue and better compete with
Walmart and Walgreens ( Did not apply to our mission)
Market Development
• Expand into areas such as Latin America and Asia. (Country drugs laws
differ)
QSPM
Key factors
External
Opportunities
1. Universal Health Care and economy recovery, $10 trillion by 2020
2. Imminent introduction of generic brands lowering the cost
3. Over the next five years, roughly $50 billion branded drugs will lose patent protection
4. With healthcare reform slowly coming into effect, 32 million Americans previously without coverage will now have
some sort of coverage.
5. People 65 years of age or older fill more than 25 prescriptions annually on average, 3 times the national average
6. As baby boomers age, approximately 70 million Americans will turn 65 in the next 20 years
7. It is estimated that by 2014, 8 out of the top 10 drugs in the U.S. will be specialty drugs, where expenditures are
expected to rise to $100 billion
8. Medicare part D market is expected to grow 8.5% annually from 2010 to 2020
9. Global pharmaceutical industry is expected to grow, especially Brazil, India, Russia, and China, which is expected to
be the 3rd largest market in 2011
Threats
1. It is estimated that there could be a dearth of 200,000 healthcare professionals and 800,000 nurses by 2020
2. Potential government intervention in health care after election in 2012
3. Imminent introduction of generic brands lowering the margin
4. CVS’ is behind Wal-Mart by nearly $140 billion in market cap
5. CVS’ additional competitor Walgreens is behind them by a market cap of roughly $10 billion
6. Walgreens increased the number of prescriptions filed in 2010 by 7.5% , whereas ours decreased
7. In the next 5 years, 9 out of the top 10 best-selling drugs in the world will go off patent, resulting in an expected
loss of sales
8. Extensive regulation has increased the time from drug discovery to approval from 6 years in the 1970s to 13.5
years in the 2000s
9. Pharmaceutical companies struggle to develop new drugs as R&D costs become high, on average between $4
billion to $11 billion per drug
Expand to 4
other
Increase
number of
MinuteClinics
by 100
locations
states in the U.S.
that we do not
have
established
locations
Weight
AS
1 to 4
TAS
0.06
0.070.04-
3
0.04
0.06
0.06
4
3
4
AS
1 to 4
0.18
-
TAS
3
-
0.16
0.18
0.24
0.18
-
3
4
3
0.12
0.24
0.18
0.040.05-
-
-
0.05-
-
-
-
-
0.160.120.21
0.21
-
0.04
0.06
0.060.07
0.07
0.05-
4
2
3
3
4
0.2
-
4
4
4
0.28
0.28
0.2
0.04-
-
2
0.08
0.05-
-
-
-
0.09total
should be
1.0
-
-
-
1
QSPM Continued
Increase
number of
MinuteClinic
s by 100
locations
Expand to 4
other
states in the
U.S.
that we do not
have
established
locations
Strengths
1. CVS is the largest pharmacy health care provider in the U.S with over 7,100 pharmacies
2. Gross profit as a percent of net revenues increased 21.0%
3. Operating expenses decreased 1.8% from 2009
4. Employee base of 202,000 employees
5. CVS is recognized as one of the largest pharmacy benefit managers (PBMs) in the US. Registering more than four
million customers per day
6. Market cap increased by 5.8% from 44 billion to 47 billion in 2010
7. More than 65% of stores are open around the clock or offer extended hours
8. Has 560 MinuteClinic locations across 26 states, easing health care overcrowding from lack of Primary care
providers
9. Generates more than $11 billion in specialty pharmacy revenue annually
Weaknesses
1. Substantial amount of outstanding debt, 11 million
2. Since March 2009, the Company has been named in a series of putative collective and class action lawsuits filed in
federal courts
3. Pharmacy services segment is showing less revenue than the retail segment
4. High cost of revenue and operational expenses; 76,156, 14,092
5. Net interest expense increased 1.2% since 2009
6. Pharmacy network claims processed decreased 12.5% in 2010 due to the expiration of a few large client contracts.
7. Income from continuing operations decreased by 7.2% in 2010
8. Net revenues decreased by $2.3 billion in 2010
9. CVS shares returned 7.9% in 2010, trailing the S&P 500 Index of 12.8% return
0.08
0.06
0.04
0.03
3
3
0.05
0.070.09
4
0.07
0.05-
4
0.05
4
0.040.030.080.03
0.040.03
0.04
0.03-
0.24
0.18
0
0.12
4
4
4
3
0.2
-
4
3
-
0.36
0.28-
0.2
2
-
0.27
-
3
0.15
3
0.15
-
1
0.06-
3
4
0.15
-
3
-
-
0.32
0.24
0
0.09
0.090.16
-
3.35
0.03
22
-
0.08
3.24
Strategic Fit
Primary Care Shortage and Rising
Demand
The percentage of U.S medical School
graduates that are choosing
Residency Spots in Family Medicine
has declined 54% since 1997
• Expected shortage of
45,000 Primary Care
Physicians (PCP) by
2020
• Health Care Reform
expected to add 32
Million newly-covered
patients by 2014
Primary Care Shortage
MinuteClinic Revenue Growth from
2007 to 2010
MinuteClinic User vs. Non User 2010
Lower total Healthcare costs for Person who used MinuteClinic
2010 MinuteClinic Overview
•
•
•
•
Largest Retail Clinic Provider
Health Care/Retail Leadership
9 Million Visits since inception
50% of Population Reports for
no current physician
3 Year Goals
Year 1: Begin Construction
($11,500,000)
Year 2: Open 50 New MinuteClinics
($9,250,000)
Year 3: Open 50 New MinuteClinics
($9,250,000)
Strategic Implementation
Estimated Cost of Additional
MinuteClinics
• $185,000 Salaries/per location/per year
• $75,000 Building (start up cost)
• $40,000 Supplies and Equipment
_______________________________________
300,000 per MinuteClinic
*100 Locations
= 30,000,000 Capital Needed
Projected Financial Assumptions
Assumptions
Capital needed
30,000,000
Cash Used
30,000,000
Tax Rate
Stock Price (Dec. 31, 2010 - year end)
Dividends Paid $.50 per share
35%
33.52
683,500,000
Projected Financials-Income
Statement
Projected Income Statement (in millions)
2009
2010
2011
110,874 15% increase
Total Revenue
98,729
96,413
Cost of Revenue
78,349
76,156
88,379 % of total revenue
Gross Profit
Operating Expenses
20,380
-
20,257
-
22,495
-
Selling, General, and Administrative
Operating Income or Loss
Total Other Income/Expense
EBIT
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest
Net Income from Continuing Operations
13,942
6,438
5,913
5,913
2,205
3,708
14,092
6,165
5,629
5,629
2,190
3
3,439
15,238 8% increase, plus $18.5 mil. In salaries
7,257
7,257
7,257
2,540 35% tax
3 Same
4,720
Loss from Discontinued Operations
Net Income
(12)
3,696
(15)
3,424
Basic EPS
Diluted EPS
Basic Average Shares Outstanding
Diluted Average Shares Outstanding
Dividends Per Share
2.58
2.55
1,434
1,450
0.305
2.51
2.49
1,367
1,377
0.35
(15) Same (possible store closings)
4,705
3.44
3.42
1,367
1,377
0.50
Projected Financials-Balance
Sheet (1)
Projected Balance Sheet (in millions)
ASSETS
Current Assets
2009
2010
2011
Cash/Cash Equivalents
1,086
1,427
1,397
Decrease by $30 mil. For capital needed
Short-term Investments
5
4
4
Same
Net Receivables
5,963
5,436
5,653
4% increase
Inventory
10,343
10,695
11,765
10% increase
Other Assets
140
144
151
5% increase
Total Current Assets
Long-term Investments
17,537
-
17,706
-
18,970
-
Plant, Property, and Equipment
7,923
8,322
8,750
5% increase, plus $11.5 mil. In supplies/building
Goodwill
25,680
25,669
26,657
4%increase
Intangible Assets
Accum. Amortization
10,127
-
9,784
-
10,273
-
5% increase
Other Assets
Deferred Long-term Asset
374
688
708
3% increase
-
-
Total Assets
61,641
62,169
65,358
Projected Balance Sheet (2)
LIABILITIES
Current Liabilities
Accounts Payable
Current Portion Long-term Debt
Other Current Liabilities
6,806
5,494
-
7,096
3,974
-
7,806 10% increase
2,454 same decrease as previous year
-
Total Current Liabilities
Long-term Debt
Other Liabilities
Deferred Long-term Liability Charges
Minority Interest
Negative Goodwill
12,300
8,756
1,102
3,678
-
11,070
8,652
1,058
3,655
-
10,260
8,548 same decrease as previous year
1,165 10% increase
3,630 same decrease as previous year
-
Total Liabilities
STOCKHOLDERS' EQUITY
25,836
24,435
23,603
37
34
Misc. Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
-
-
34 same
-
16
16
16 same
Retained Earnings
16,355
19,303
23,324 Increase from net income, minus dividends paid
Treasury Stock
(7,610)
(9,030)
(9,030) same
Capital Surplus
27,198
27,610
27,610 same
Other Stockholders' Equity
(191)
(199)
(199) same
Total Stockholders' Equity
35,805
37,734
41,755
Total Liabilities and Stockholders' Equity
61,641
62,169
65,358
Project Financial Ratios
CVS's Projected Ratios 2010 v. 2011
Current Ratio
Quick Ratio
Debt to Total Assets
Debt to Equity
Fixed Asset Turnover
Total Asset Turnover
Inventory Turnover
Gross Profit Margin %
Return on Stockholders' Equity %
2010
1.60
0.63
0.39
0.65
11.59
1.55
9.01
21.01
9.33
2011
1.85
0.70
0.36
0.57
12.67
1.70
9.42
20.29
11.26
Strategic Evaluation
Balanced Scorecard
Area of Objectives Measure or Target
Customers
Industry reports/Market Cap. Higher than
1 Brand Identity competitors
2 Satisfaction
Employees
1 Employee Moral
2 Service Training
Operations
1 Patient visits
2 Locations
Business Ethics
1 Ethics Training
2 Patient
Awareness
Financial
1 Revenues
2 Ratio Analysis
Time
Expectation
Primary Responsibility
Customer satisfaction surveys
Semi-Annual
Health Care/Strategy Marketing
Officer
Health Care/Strategy Marketing
Officer
Survey
# of seminars
Semi-Annual
Yearly
Chief Human Resources Officer
Chief Operations Officer
Increase by 1 million each year
Increase MinuteClinic locations by 100
Yearly
3 Years
Chief Operations Officer
Chief Operations Officer
# of ethics training sessions
"Learn about your medicines"- medicinal
information
Yearly
Yearly
Chief Human Resources Officer
Health Care/Strategy Marketing
Officer
Increase by 15% each year
Better than competitors/industry Avg.
Yearly
Yearly
CFO
CFO
Yearly
CVS Caremark Update
Current CVS Locations (2013)
Stock Performance
MinuteClinic Current
Locations
Update Facts
• In 2012, Email-Pharmacist was used 2,000 times.
• CVS Pharmacy filled 1.3 million prescriptions filled through
mail service and 3.7 million retail prescriptions in 2012
• 99.998% Dispensing Accuracy in 2012 for mail service
• Filled 602,992 prescriptions that were 90-day supplies
• Order Refill is the most visited area of their Website
• 60.4% of Mail Service scripts required no intervention,
39.6% required some time of follow up
• In 2011 Tom Ryan ( CEO ) retired, and new CEO was hiredLarry Merlo