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7 I 2007 Annual Report
The past year set the stage for
a new chapter in our company’s
history as we completed the
transformational merger of CVS
Corporation and Caremark Rx, Inc.
We are now the largest integrated
provider of prescriptions and related
health services in the United States,
filling or managing more than a
quarter of all prescriptions in the
nation. Beyond the sheer scale
of our operations, CVS Caremark
is positioned to improve access
for patients, promote better health
outcomes, and control payor costs
in a way that no pharmacy retailer
or PBM could do separately. Our
unique model provides us with a
significant opportunity to gain share
and create new sources of growth
going forward.
It was a very successful year on
a number of other fronts as well.
Here are some highlights of our
key accomplishments:
• CVS Caremark posted record
revenue and earnings, driven
by solid performance in
both the retail and pharmacy
services segments.
• We opened 275 new or relocated
CVS/pharmacy stores and saw
continued improvement in sales
and profits in the stores we
acquired from Albertson’s, Inc.,
in 2006, and from J.C. Penney
in 2004.
• Caremark Pharmacy Services
signed up $2.1 billion in new
business, a clear sign that payors
understand the potential benefits
of our combination.
• We opened 316 MinuteClinics,
increasing our total at year-
end to 462 clinics in 25 states.
That’s about four times the
number operated by our nearest
competitor.
• We attained our goal of generat-
ing $2 billion in free cash flow,
and we launched a $5 billion
share repurchase program that
we completed in the first quarter
of 2008.
• Even in the midst of all this
activity, we remained keenly
focused on service, execution,
and expense control across
the company.
Total revenues rose 74.2 percent
to a record $76.3 billion. In our
CVS/pharmacy segment, same
store sales rose 5.3 percent. Gross
margins increased in both our retail
and PBM businesses, due largely to
significant generic drug introductions
and purchasing synergies resulting
from the merger. Net earnings
climbed 92.6 percent to $2.6 billion,
or $1.92 per diluted share.
Turning to CVS Caremark’s stock
performance, the 29.3 percent total
return on our shares far surpassed
the modest numbers posted by the
S&P 500 Index and the Dow Jones
Industrial Average (DJIA) in 2007.
Our three-year performance is just
as impressive. While the S&P 500
and the DJIA returned 21.2 percent
and 23.0 percent, respectively, CVS
shares returned 78.4 percent.
We’re going to offer services that
no other competitor can match.
In the short time since completing
our merger, we’ve made substantial
progress in integrating our two
companies. We brought Pharma-
Care, CVS’ legacy PBM business,
under the Caremark umbrella,
connected all our back-end systems,
and are set to achieve more than
Dear Shareholder: