CVS 2015 Annual Report Download

Download and view the complete annual report

Please find the complete 2015 CVS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

What happens
when you start
with heart?
2015 Annual Report

Table of contents

  • Page 1
    What happens when you start with heart? 2015 Annual Report

  • Page 2
    ... 21 2015 Financial Report Financial highlights (in millions, except per share figures) 2015 2014 % change Net revenues Operating profit Net income Diluted EPS from continuing operations Free cash flow* Stock price at year-end Market capitalization at year-end plus proceeds from sale-leaseback...

  • Page 3
    ... services to the long-term care market. Omnicare dispenses 100 million scripts annually to approximately 2 million patients. We also grew our core pharmacy business with the purchase of more than 1,670 pharmacies and nearly 80 retail clinics from Target Corporation. This transaction, which closed...

  • Page 4
    ...balance sheet with well-laddered debt maturities. We maintain a high triple-B credit rating that allows CVS Health to continue to effectively finance the working capital needs of the company. While the stock market has been tumultuous, CVS Health shares produced a total return of 2.9 percent in 2015...

  • Page 5
    ... $14.8 B $40 billion CVS Pharmacy filled in revenues from specialty drugs dispensed and managed across the enterprise n 84% Health Plan n 12% Employer n 4% Government With a client retention rate of 98%, net new business for 2016 totaled $12.7B of all retail prescriptions in 2015 to lead the...

  • Page 6
    ...CVS Pharmacy stores have typically filled twice the number of prescriptions as Target pharmacies, so these new locations represent a significant opportunity to drive script growth and profitability. In addition to the acquired Target locations, we opened 161 new stores in 2015. Factoring in closings...

  • Page 7
    ... as savings of both time and money. The aging population has created new growth opportunities and was a key driver of our Omnicare acquisition The nation's aging population will play a major role in the evolving health care market, and it will create new opportunities for CVS Health. The number of...

  • Page 8
    6 CVS Health

  • Page 9
    ... positive impact on the lives of millions of people and help them on their path to better health. In a constantly evolving health care environment, that's a responsibility we take seriously. What happens when you start with heart? We invite you to turn the page and learn more. 2015 Annual Report 7

  • Page 10
    ... plan members. We operate five mail order pharmacies and offer broad capabilities that include formulary management and clinical services. Approximately 9,600 CVS Pharmacy® stores dispense more prescriptions than any other drugstore chain. Through face-to-face counseling, our pharmacists drive...

  • Page 11
    ... prescriptions dispensed or managed annually in enterprise revenue in 2015, more than 85% in health care s s ss e e c cc A Ac Omnicare® is a leading provider of pharmacy services to the long-term care market. Acquired in 2015, it enhances our service offerings to address the needs of an aging...

  • Page 12
    ...CVS Pharmacy locations from coast to coast, members benefit from our unique, integrated solutions. Take Maintenance Choice, which gives plan members the option of receiving their maintenance medications by mail or picking them up at one of our retail stores. Helping customers get their prescriptions...

  • Page 13
    ..., chronic disease monitoring, and wellness programs. As one of the many CVS Health integrated offerings, clients have increasingly incorporated MinuteClinic into their CVS Caremark plan designs. The result has been improved health care access for members and lower costs for clients. N JA More than...

  • Page 14
    ... with multiple medications to consolidate eligible maintenance prescriptions to one monthly pickup date. By reducing the number of trips a customer has to make, we're removing yet another barrier to good health. 6 12 CVS Pharmacy adherence rates are, on average, percentage points better than for...

  • Page 15
    ... our store brands, sales of which are growing at more than double the industry average. Our customers value the lower prices of these high-quality alternatives to national brands, and we benefit from the higher margins they provide. Our latest offerings include CVS Health® branded health products...

  • Page 16
    ... pharmacists and nurse practitioners. For millions of CVS Caremark plan members, the Target deal puts more of our pharmacies within easy driving distance. That has allowed many more plan members to reap the benefits of our Maintenance Choice program. Other CVS Health integrated offerings- Pharmacy...

  • Page 17
    ... access to the medications they need has never been easier. 2015 2020 2025 2030 2035 6.3 6.7 7.5 9.1 11.9 U.S. Population Over Age 85 in millions (estimated) 10,000 baby boomers turn 65 every day of people turning age 65 can expect to use some form of long-term care 70% 2015 Annual Report...

  • Page 18
    ...payor costs for all specialty medications, including those that are infused or paid under the medical benefit. Specialty Drug Revenue in billions $22 $19 $10 $30 $40 CVS Specialty is a market leader, with nearly $ 40 billion in specialty revenues in 2015 2012 2013 2014 2015 2011 16 CVS Health

  • Page 19
    ... text messages containing prescription refill reminders and status updates. And we've made our CVS Pharmacy mobile app more useful than ever. Its Reminder Tool alerts customers to take their medications, while Mobile Prescription Pickup increases privacy at the pharmacy counter. Customers can simply...

  • Page 20
    ... wellness central to our charge for a better world. From the 2015 deployment of telehealth to the launch of new digital pharmacy tools that drive adherence, CVS Health innovations are increasing access to care and making it more affordable. Such Health in Action initiatives can be seen in a variety...

  • Page 21
    ... initiatives. CVS Health is working to reach a 15 percent reduction goal by 2018. A commitment to integrating green building concepts in new store designs and retrofits will help us in our efforts to get there. We are also making meaningful changes to the ingredients in our store brands. In 2015, we...

  • Page 22
    ...center launches in 2016 at Fort Bragg, North Carolina. CVS Health has long demonstrated a commitment to supporting diverse suppliers, including minority- and women-owned enterprises, disability-owned enterprises, and many others. We spent $913 million on goods and services provided by such companies...

  • Page 23
    ... Sheets 56 Consolidated Statements of Cash Flows 57 Consolidated Statements of Shareholders' Equity 58 Notes to Consolidated Financial Statements 98 Five-Year Financial Summary 99 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm 100 Stock Performance Graph 2015 Annual...

  • Page 24
    ..., mail order, specialty pharmacy and infusion services, retail pharmacy network management services, prescription management systems, clinical services, disease management services and medical spend management. Our clients are primarily employers, insurance companies, unions, government employee...

  • Page 25
    ...Company's specialty mail order pharmacies, so all revenue from this specialty prescription services program is recorded within the Pharmacy Services Segment. Members then can choose to pick up their medication at their local CVS Pharmacy or have it sent to their home through the mail. In August 2015...

  • Page 26
    ... services to support the Company. The Corporate Segment consists of certain aspects of our executive management, corporate relations, legal, compliance, human resources, corporate information technology and finance departments. Results of Operations Summary of our Consolidated Financial Results...

  • Page 27
    ... new business grew for the Pharmacy Services Segment. The increase in our generic dispensing rates in both of our operating segments continued to have a negative effect on net revenue in 2015 as compared to 2014, as well as in 2014 as compared to 2013. • Both segments benefited from the Omnicare...

  • Page 28
    ... growth rate in 2014. Income (loss) from discontinued operations In connection with certain business dispositions completed between 1991 and 1997, the Company retained guarantees on store lease obligations for a number of former subsidiaries, including Linens 'n Things, which filed for bankruptcy...

  • Page 29
    ... activity in 2015, 2014 and 2013. The net income attributable to CVS Health and per diluted share in 2014 includes a $521 million loss on early extinguishment of debt, which negatively impacted the net income growth rate in 2014. Segment Analysis We evaluate the performance of our Pharmacy Services...

  • Page 30
    ... which are included within the mail choice category. Pharmacy network is defined as claims filled at retail and specialty pharmacies, including our retail drugstores and long-term care pharmacies, but excluding Maintenance Choice activity. Net revenues in our Pharmacy Services Segment increased $11...

  • Page 31
    ... Company's specialty mail order pharmacies, so all revenue from this specialty prescription services program is recorded within the Pharmacy Services Segment. • The Pharmacy Services Segment recognizes revenues from its pharmacy network transactions based on individual contract terms. Our Pharmacy...

  • Page 32
    ... under the applicable accounting rules. Our Pharmacy Services Segment network contracts are predominantly accounted for using the gross method, which results in higher revenues, higher cost of revenues and lower gross profit rates. • Our gross profit as a percentage of revenues benefited from the...

  • Page 33
    ...and year ended December 31, 2015 include $52 million and $64 million, respectively, of acquisitionrelated integration costs related to the acquisition of Omnicare and the pharmacies and clinics of Target. (2) Includes the adjustment to convert 90-day, non-specialty prescriptions to the equivalent of...

  • Page 34
    ..., 2014, and 2013, respectively. • Pharmacy revenue growth continued to benefit from increased utilization by Medicare Part D beneficiaries, our ability to attract and retain managed care customers and favorable industry trends. These trends include an aging American population; many "baby boomers...

  • Page 35
    ... of drug payments by Medicaid and Medicare could impact our pricing to customers and other payors and/or could impact our ability to negotiate discounts or rebates with manufacturers, wholesalers, PBMs or retail and mail pharmacies. See "Efforts to reduce reimbursement levels and alter health care...

  • Page 36
    ...executive management, corporate relations, legal, compliance, human resources, corporate information technology and finance related costs. The increase in operating expenses in 2015 was primarily due to acquisition-related transaction and integration costs associated with the acquisition of Omnicare...

  • Page 37
    ... in 2013. Share repurchase programs The following share repurchase programs were authorized by the Company's Board of Directors: IN BILLIONS Authorization Date December 15, 2014 ("2014 Repurchase Program") December 17, 2013 ("2013 Repurchase Program") September 19, 2012 ("2012 Repurchase Program...

  • Page 38
    ... in May 2015. Pursuant to the authorization under the 2012 Repurchase Program, effective October 1, 2013, the Company entered into a $1.7 billion fixed dollar ASR agreement with Barclays. Upon payment of the $1.7 billion purchase price on October 1, 2013, the Company received a number of shares of...

  • Page 39
    ... the Notes were used to fund the Omnicare acquisition and the acquisition of the pharmacies and clinics of Target. The remaining proceeds were used for general corporate purposes. Upon the closing of the Omnicare acquisition in August 2015, the Company assumed the long-term debt of Omnicare that had...

  • Page 40
    ...debt ratings have a direct impact on our future borrowing costs, access to capital markets and new store operating lease costs. Quarterly Dividend Increase In December 2015, our Board of Directors authorized a 21% increase in our quarterly common stock dividend to $0.425 per share effective in 2016...

  • Page 41
    ... Long-term debt Interest payments on long-term debt (2) Other long-term liabilities reflected in our consolidated balance sheet (1) The Company leases pharmacy and clinic space from Target. See Note 7, "Leases" to the consolidated financial statements for additional information regarding the lease...

  • Page 42
    ... accounting policies with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our disclosures relating to them. Revenue Recognition Pharmacy Services Segment Our Pharmacy Services Segment sells prescription drugs directly through our mail service dispensing pharmacies...

  • Page 43
    ... Co-Payments or inventory risk related to retail network claims, we believe that all of the other indicators of gross revenue reporting are present. For contracts under which we act as an agent, we record revenues using the net method. We deduct from our revenues the manufacturers' rebates that...

  • Page 44
    ...of Financial Condition and Results of Operations Retail/LTC Segment Retail Pharmacy We recognize revenue from the sale of front store merchandise at the time the merchandise is purchased by the retail customer and recognize revenue from the sale of prescription drugs when the prescription is picked...

  • Page 45
    ... deferred. The deferred amounts are then amortized to reduce cost of revenues on a straight-line basis over the life of the related contract. We have not made any material changes in the way we account for vendor allowances and purchase discounts during the past three years. 2015 Annual Report 43

  • Page 46
    ... used to determine cost of sales and inventory in our mail service and specialty pharmacies in our Pharmacy Services Segment. We reduce the value of our ending inventory for estimated inventory losses that have occurred during the interim period between physical inventory counts. Physical inventory...

  • Page 47
    ..., client contracts and relationships, favorable leases and covenants not to compete. These intangible assets arise primarily from the determination of their respective fair market values at the date of acquisition. Amounts assigned to identifiable intangible assets, and their related useful lives...

  • Page 48
    ... critical accounting policy was $38.1 billion and $13.9 billion as of December 31, 2015, respectively. We did not record any impairment losses related to goodwill or other intangible assets during 2015, 2014 or 2013. During the third quarter of 2015, we performed our required annual impairment tests...

  • Page 49
    ... since we must use judgment to estimate the ultimate cost that will be incurred to settle reported claims and unreported claims for incidents incurred but not reported as of the balance sheet date. When estimating our self-insurance liability, we consider a number of factors, which include, but...

  • Page 50
    ...; revenue growth; earnings or earnings per common share growth; adjusted earnings or adjusted earnings per common share growth; free cash flow; debt ratings; inventory levels; inventory turn and loss rates; store development; relocations and new market entries; retail pharmacy business, sales trends...

  • Page 51
    ... a broad and complex regulatory framework, including compliance with new and existing federal, state and local laws and regulations relating to health care, accounting standards, corporate securities, tax, environmental and other laws and regulations affecting our business. 2015 Annual Report 49

  • Page 52
    ... and Analysis of Financial Condition and Results of Operations • Risks related to litigation, government investigations and other legal proceedings as they relate to our business, the pharmacy services, retail pharmacy, LTC pharmacy or retail clinic industries or to the health care industry...

  • Page 53
    ... report a system of internal accounting controls and procedures to provide reasonable assurance, at an appropriate cost/benefit relationship, that the unauthorized acquisition, use or disposition of assets are prevented or timely detected and that transactions are authorized, recorded and reported...

  • Page 54
    ... with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of CVS Health Corporation as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each...

  • Page 55
    ...CVS Health Weighted average shares outstanding Dividends declared per share See accompanying notes to consolidated financial statements. $ 153,290 126,762 26,528 17,074 9,454 838 - 8,616 3,386 5,230 9 5,239 (2) $ $ $ $ 5,237 4.65 0.01 4.66 1,118 $ $ $ $ 4.62 0.01 4.63 1,126 1.40 2015 Annual Report...

  • Page 56
    ...3 1 , IN MILLIONS 2015 2014 $ 4,644 (35) 4 (37) (68) 4,576 - $ 4,576 $ $ 2013 4,592 (30) 3 59 32 4,624 - 4,624 Net income Other comprehensive income (loss): Foreign currency translation adjustments, net of tax Net cash flow hedges, net of tax Pension and other postretirement benefits, net of tax...

  • Page 57
    ... 2015 2014 Assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Deferred income taxes Other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Other assets Total assets Liabilities: Accounts payable Claims...

  • Page 58
    ...based compensation Loss on early extinguishment of debt Deferred income taxes and other noncash items Change in operating assets and liabilities, net of effects from acquisitions: Accounts receivable, net Inventories Other current assets Other assets Accounts payable and claims and discounts payable...

  • Page 59
    ...year Stock option activity and stock awards Excess tax benefit on stock options and stock awards Portion of accelerated share repurchase not settled End of year Retained earnings: Beginning of year Changes in inventory accounting principles (Note 2) Net income attributable to CVS Health Common stock...

  • Page 60
    ... health care provider in the United States based upon revenues and prescriptions filled. The Company currently has three reportable business segments, Pharmacy Services, Retail/LTC and Corporate, which are described below. Changes in Segment Definition As a result of the acquisition of Omnicare...

  • Page 61
    ... store) located in 49 states, the District of Columbia, Puerto Rico and Brazil operating primarily under the CVS Pharmacy, CVS, Longs Drugs, Navarro Discount Pharmacy and Drogaria Onofre names, the online retail websites, CVS.com, Navarro.com and Onofre.com.br, and 1,135 retail health care clinics...

  • Page 62
    ...pharmacy benefit managers, insurance companies, governmental agencies and long-term care facilities), clients, members and private pay customers, as well as vendors and manufacturers. Charges to bad debt are based on both historical write-offs and specifically identified receivables. 60 CVS Health

  • Page 63
    ... for using the weighted average cost method. See Note 2, "Changes in Accounting Principle." Physical inventory counts are taken on a regular basis in each retail store and long-term care pharmacy and a continuous cycle count process is the primary procedure used to validate the inventory balances on...

  • Page 64
    ...the price the client pays directly to the PSS, net of any volume-related or other discounts paid back to the client (see "Drug Discounts" below), (ii) the price paid to the PSS by client plan members for mail order prescriptions ("Mail Co-Payments") and the price paid to retail network pharmacies by...

  • Page 65
    ... to Retail Co-Payments or inventory risk related to retail network claims, management believes that all of the other applicable indicators of gross revenue reporting are present. For contracts under which the PSS acts as an agent, revenue is recognized using the net method. Drug Discounts The PSS...

  • Page 66
    ...' benefit plans from the PSS' mail service dispensing pharmacies, net of any volume-related or other discounts (see "Vendor allowances and purchase discounts" on the following page) and (ii) the cost of prescription drugs sold (including Retail Co-Payments) through the PSS' retail pharmacy network...

  • Page 67
    ... manufacturers for administrative services. Purchase discounts and administrative service fees are recorded as a reduction of "Cost of revenues". Retail/LTC Segment Vendor allowances received by the RLS reduce the carrying cost of inventory and are recognized in cost of revenues when the related...

  • Page 68
    ... stock at December 31, 2015 and 2014, respectively. These shares are designated for use under various employee compensation plans. Since the Company holds these shares, they are excluded from the computation of basic and diluted shares outstanding. Accumulated other comprehensive income Accumulated...

  • Page 69
    ... clinical health information network. The Pharmacy Services and Retail/LTC segments utilize this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees of approximately $50 million in the years ended December 2015 and 2014...

  • Page 70
    ... market price of the common shares and, therefore, the effect would be antidilutive. New Accounting Pronouncement In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014...

  • Page 71
    ... on the Company's consolidated balance sheet as of December 31, 2014: IN MILLIONS As Previously Reported $ 1,510 74,252 11,695 74,252 Adjustments $ (65) (65) (65) (65) $ As Revised 1,445 74,187 11,630 74,187 Other assets Total assets Long-term debt Total liabilities and shareholders' equity In...

  • Page 72
    ... received 738,765 CVS Health Corporation restricted stock awards with a fair value of approximately $80 million as replacement awards. Omnicare is a leading health care services company that specializes in the management of complex pharmaceutical care. Omnicare's long-term care ("LTC") business is...

  • Page 73
    ... Omnicare acquisition. Pro forma income from continuing operations for the year ended December 31, 2014, includes a $521 million loss on the early extinguishment of debt recorded by CVS Health. Target Pharmacy Acquisition On December 16, 2015, the Company acquired the pharmacy and clinic businesses...

  • Page 74
    ... at the time the consolidated financial statements were prepared. Accordingly, such amounts may change. As of December 31, 2015, the most significant open item was the inventory related purchase price adjustment. Intangible assets acquired include customer relationships with an estimated useful life...

  • Page 75
    ... its required annual goodwill impairment tests. The Company concluded there were no goodwill impairments as of the testing date. Below is a summary of the changes in the carrying amount of goodwill by segment for the years ended December 31, 2015 and 2014: IN MILLIONS Pharmacy Services $ 19,658...

  • Page 76
    ... $494 million in 2015, 2014 and 2013, respectively. The anticipated annual amortization expense for these intangible assets for the next five years is as follows: IN MILLIONS 2016 2017 2018 2019 2020 $ 760 735 705 662 490 The following table is a summary of the Company's intangible assets as of...

  • Page 77
    ... in May 2015. Pursuant to the authorization under the 2012 Repurchase Program, effective October 1, 2013, the Company entered into a $1.7 billion fixed dollar ASR agreement with Barclays. Upon payment of the $1.7 billion purchase price on October 1, 2013, the Company received a number of shares of...

  • Page 78
    ... 5.75% senior notes due 2041 5.3% senior notes due 2043 5.125% senior notes due 2045 Capital lease obligations Other Total debt principal Debt premiums Debt discounts and deferred financing costs Less: Short-term debt (commercial paper) Current portion of long-term debt Long-term debt $ - - 750...

  • Page 79
    ... the Notes were used to fund the Omnicare acquisition and the acquisition of the pharmacies and clinics of Target. The remaining proceeds were used for general corporate purposes. Upon the closing of the Omnicare acquisition in August 2015, the Company assumed the long-term debt of Omnicare that had...

  • Page 80
    ... $1.5 billion, net of discounts and underwriting fees. The 2014 Notes pay interest semi-annually and may be redeemed, in whole at any time, or in part from time to time, at the Company's option at a defined redemption price plus accrued and unpaid interest to the redemption date. The net proceeds of...

  • Page 81
    ... and mail order locations, ten of its distribution centers and certain corporate offices under noncancelable operating leases, typically with initial terms of 15 to 25 years and with options that permit renewals for additional periods. The Company also leases certain equipment and other assets under...

  • Page 82
    ... 401(k) savings plans that cover all employees who meet plan eligibility requirements. The Company makes matching contributions consistent with the provisions of the plans. At the participant's option, account balances, including the Company's matching contribution, can be transferred without...

  • Page 83
    ... on current market rates the one-time settlement charge at final liquidation is estimated to be in the range of approximately $175 million to $250 million. The following tables outline the change in benefit obligations and plan assets over the comparable periods: IN MILLIONS 2015 2014 Change in...

  • Page 84
    ...as Level 2 in the fair value hierarchy. The Company's qualified defined benefit pension plan assets as of December 31, 2014 consisted of 18% equity, 81% fixed income and 1% money market securities of which 14% were classified as Level 1 and 86% as Level 2 in the fair value hierarchy. 82 CVS Health

  • Page 85
    ... to pay covered expenses as they are incurred. For retiree medical plan accounting, the Company reviews external data and its own historical trends for health care costs to determine the health care cost trend rates. As of December 31, 2015 and 2014, the Company's other postretirement benefits have...

  • Page 86
    ...officers and employees of the Company or any subsidiary of the Company. Payment of such annual incentive and long-term performance awards will be in cash, stock, other awards or other property, at the discretion of the Management Planning and Development Committee of the Company's Board of Directors...

  • Page 87
    ... awards are considered nonvested share awards and require no payment from the employee. Compensation cost is recorded based on the market price of the Company's common stock on the grant date and is recognized on a straight-line basis over the requisite service period. The Company granted 2,695,000...

  • Page 88
    ...to the Company's effective income tax rate for continuing operations for the years ended December 31: 2015 Statutory income tax rate State income taxes, net of federal tax benefit Other Effective income tax rate 2014 35.0% 4.3 0.2 39.5% 2013 35.0% 4.0 (0.1) 38.9% 35.0% 4.0 0.3 39.3% 86 CVS Health

  • Page 89
    ... of the Company's deferred tax assets and liabilities as of December 31: IN MILLIONS 2015 2014 Deferred tax assets: Lease and rents Inventory Employee benefits Allowance for doubtful accounts Retirement benefits Net operating loss and capital loss carryforwards Deferred income Other Valuation...

  • Page 90
    ... Company's 2014 and 2015 consolidated U.S. federal income tax returns. The Company and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2015, no examination has resulted in any proposed adjustments that would result...

  • Page 91
    ... the contract terms between the pharmacies and Caremark, but later returned to federal court, where it currently remains. In addition, in October 2003, two independent pharmacies, North Jackson Pharmacy, Inc. and C&C, Inc. d/b/a Big C Discount Drugs, Inc., filed three separate putative class action...

  • Page 92
    ... Department of Health and Human Services, requesting information relating to the processing of Medicaid and certain other government agency claims on behalf of its clients (which allegedly resulted in underpayments from our pharmacy benefit management clients to the applicable government agencies...

  • Page 93
    ... transfer of prescriptions for drugs or medications to the Company's pharmacies in the form of gift cards, cash, non-prescription merchandise or discounts or coupons for non-prescription merchandise. The subpoena relates to an investigation of possible false or otherwise improper claims for payment...

  • Page 94
    ... 27, 2015, a consolidated class action complaint was filed by plaintiffs naming Omnicare, the members of the Omnicare Board of Directors, CVS Health, CVS Pharmacy, Inc. and its merger subsidiary as defendants. The complaint alleged that the members of the Omnicare Board of Directors breached their...

  • Page 95
    ...tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting the pharmacy services, retail pharmacy, long-term care pharmacy or retail clinic industry or the health care industry generally. 2015 Annual Report...

  • Page 96
    ... 31, 2015, the Corporate Segment operating loss includes $156 million of acquisition-related transaction and integration costs and a $90 million charge related to a legacy lawsuit challenging the 1999 legal settlement by MedPartners of various securities class actions and a related derivative claim...

  • Page 97
    ... 8 1,169 $ 4,600 1,217 9 1,226 $ $ 4.65 4.62 $ $ 3.98 3.96 $ $ 3.78 3.75 (1) Comprised of income from continuing operations less amounts allocable to participating securities of $27 million and $19 million for the years ended December 31, 2015 and 2014, respectively. 2015 Annual Report 95

  • Page 98
    ... Quarter Year 2015: Net revenues Gross profit Operating profit Income from continuing operations Income (loss) from discontinued operations, net of tax Net income attributable to CVS Health Basic earnings per share: Income from continuing operations attributable to CVS Health Income (loss) from...

  • Page 99
    ... to CVS Health Net income attributable to CVS Health Diluted earnings per share: Income from continuing operations attributable to CVS Health Loss from discontinued operations attributable to CVS Health Net income attributable to CVS Health Dividends per share Stock price: (New York Stock Exchange...

  • Page 100
    ... 9,681 Total shareholders' equity Number of stores (at end of year) (1) As of June 30, 2015, the Company early adopted Accounting Standard Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (Topic 835-30) issued by the Financial Accounting Standards Board in April 2015. The...

  • Page 101
    ... Public Accounting Firm The Board of Directors and Shareholders of CVS Health Corporation We have audited the accompanying consolidated balance sheets of CVS Health Corporation as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, shareholders...

  • Page 102
    ... Sector Group Index, which currently includes 56 health care companies. Relative Total Returns Since 2010 - Annual D EC EMB ER 31, 20 1 0 T O D E CE M BE R 3 1 , 2 0 1 5 $325 $300 $275 $250 $225 $200 $175 $150 $125 $100 $75 $50 $25 $0 2010 CVS Health S&P 500 2011 2012 2013 2014 2015 S&P 500 Food...

  • Page 103
    ... as of March 1, 2016. Shareholder Information Corporate Headquarters CVS Health Corporation One CVS Drive, Woonsocket, RI 02895 (401) 765-1500 Annual Shareholders' Meeting May 19, 2016 CVS Health Corporate Headquarters Stock Market Listing The New York Stock Exchange Symbol: CVS Transfer Agent and...

  • Page 104
    WE ARE A pharmacy innovation company OUR STRATEGY Reinventing pharmacy OUR PURPOSE Helping people on their path to better health OUR VALUES Innovation Collaboration Caring Integrity Accountability The CVS Health 2015 Annual Report achieved the following results by printing on paper containing ...