Hi

I'm trying to figure out the formula for the inventory turnover of CVS in 2010. I know that is the cost of goods sold/ average income. In the statement I could see the cost of goods sold which is $76,156/average income (that i couldn't find). The average inventory supposedly is the sum of the beginning inventory and the ending inevntory/2. Howevr, I don't see that info neither. Can you please help me out

How Do You See CVS Caremark? CV S C A R E M A R K C O R P O R AT I O N Some think of us as the nation's leading drugstore chain, providing high-quality service and convenience in the pharmacy and front of the store. For others, we're a leading pharmacy benefits manager, improving outcomes and controlling costs for clients and plan members. 2010 ANNUAL REPORT One CVS Drive Woonsocket, RI 02895 401.765.1500 info.cvscaremark.com is this Two Pharmacists and a Nurse Practitioner - or A Whole New Way to Deliver Pharmacy Services ? CVS Caremark 2010 Annual Report Both are true, of course, but we see ourselves as something much more. CVS Caremark is the nation's largest pharmacy care company, and we take our leadership position seriously. In a period of unprecedented transition for the U.S. health care system, we're working to improve access and treatment in ways that no one else in our industry can. Benefiting from our retail footprint and the many investments we've made in technology, training, adherence programs, and retail clinics, we can help patients manage chronic disease more effectively than ever. We've already rolled out new services to accomplish this, and more are on the way. How you see CVS Caremark will change in a fundamental way in the coming years. We think you're beginning to see the evolution of pharmacy care. Financial Highlights fiscal year in millions, except per share figures Shareholder Information fiscal year 2010 2009 % change Net revenues $ 96,413 $ 98,729 -2.3% Operating profit $ $ -4.3% 6,165 Net income attributable to CVS Caremark $ 3,427 Diluted EPS attributable to CVS Caremark $ 2.49 Stock price at year-end $ 34.77 Market capitalization at year-end $ 47,423 6,438 $ 3,696 -7.3% $ -2.3% $ 2.55 32.21 +7.9% $ 44,841 +5.8% NET REVENUE in billions of dollars 98.7 96.4 100 DILUTED EPS ATTRIBUTABLE TO CVS CAREMARK in dollars ANNUAL DIVIDENDS DECLARED in cents per common share 3.0 0.35 87.5 30.5 2.55 2.49 76.3 80 35.0 2.18 2.4 25.8 0.28 60 40 1.8 1.60 1.2 0.14 20 0.6 0.07 0 0 0 06 07 08 09 10 06 07 08 09 10 SHAREHOLDER INFORMATION THOMAS M. RYAN Chairman of the Board and Chief Executive Officer EDWIN M. BANKS (1) (3) Founder and Managing Partner Washington Corner Capital Management, LLC CORPORATE HEADQUARTERS CVS Caremark Corporation One CVS Drive, Woonsocket, RI 02895 (401) 765-1500 C. DAVID BROWN II (2) (3) Chairman of the Firm Broad and Cassel ANNUAL SHAREHOLDERS' MEETING May 11, 2011 CVS Caremark Corporate Headquarters DAVID W. DORMAN (2) (3) Non-Executive Chairman of the Board Motorola Solutions, Inc. STOCK MARKET LISTING The New York Stock Exchange Symbol: CVS ANNE M. FINUCANE (3) Global Strategy and Marketing Officer Bank of America Corporation TRANSFER AGENT AND REGISTRAR Questions regarding stock holdings, certificate replacement/transfer, dividends andaddress changes should be directedto: TROYEN A. BRENNAN, M.D. Executive Vice President and Chief Medical Officer 0.21 15.5 43.8 DIRECTORS LARRY J. MERLO President and Chief Operating Officer 22.8 1.92 OFFICERS DAVID M. DENTON Executive Vice President and Chief Financial Officer 06 07 08 09 HELENA B. FOULKES Executive Vice President and Chief Marketing Officer 10 PER G.H. LOFBERG Executive Vice President and President - Caremark Pharmacy Services JONATHAN C. ROBERTS Executive Vice President and Chief Operating Officer - Caremark Pharmacy Services CVS Caremark is the largest pharmacy care provider in the United States with integrated offerings across the entire spectrum of pharmacy care. We are uniquely positioned to engage plan members in behaviors that improve their health and to lower overall health care costs for health plans, plan sponsors, and their members. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics, and we are a leading provider of Medicare Part D Prescription Drug Plans. As one of the country's largest pharmacy benefits managers (PBMs), we provide access to a network of approximately 65,000 pharmacies, including more than 7,100 CVS/pharmacy stores that provide unparalleled service and capabilities. Our stores fill nearly one in five retail DOUGLAS A. SGARRO Executive Vice President and Chief Legal Officer Our Vision LISA G. BISACCIA Senior Vice President and Chief Human Resources Officer We strive to improve the quality of human life. Our Mission JOHN M. BUCKLEY Senior Vice President and Chief Compliance Officer We provide expert care and innovative solutions in pharmacy and health care that are effective and easy for our customers. NANCY R. CHRISTAL Senior Vice President - Investor Relations Our Values LAIRD K. DANIELS Senior Vice President - Finance and Controller and Chief Accounting Officer ACCOUNTABILITY CAROL A. DENALE Senior Vice President and Corporate Treasurer We take ownership for our actions and the results. RESPECT prescriptions nationwide, and we have the #1 or #2 market share in 20 of the top 25 U.S. We treat customers and colleagues so they feel valued and appreciated. SARA J. FINLEY Senior Vice President and General Counsel drugstore markets. INTEGRITY STUART M. MCGUIGAN Senior Vice President and Chief Information Officer OPENNESS Puerto Rico. At year-end, we operated 7,182 retail drugstores, 560 MinuteClinic locations, We try new things that will lead to innovative and easy solutions for customers. 44 retail specialty pharmacy stores, 18 specialty mail order pharmacies and four mail order TEAMWORK pharmacies, and our CVS.com and Caremark.com Web sites. We share information and resources as we work together to deliver results. designed and produced by see see eye / Atlanta We do what we say and what is right. We employ approximately 201,000 associates in 44 states, the District of Columbia, and ZENON P. LANKOWSKY Corporate Secretary OFFICERS' CERTIFICATIONS The Company has filed the required certifications under Section 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of our public disclosures as Exhibits 31.1 and 31.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. After our 2010 annual meeting of stockholders, the Company filed with the New York Stock Exchange the CEO certification regarding its compliance with the NYSE corporate governance listing standards as required by NYSE Rule 303A.12(a). KRISTEN GIBNEY WILLIAMS (1) Former Executive Prescription Benefits Management Division of Caremark International, Inc. MARIAN L. HEARD (2) (3) President and Chief Executive Officer Oxen Hill Partners WILLIAM H. JOYCE (1) Chairman of the Board and Chief Executive Officer Advanced Fusion Systems, LLC LARRY J. MERLO President and Chief Operating Officer CVS Caremark Corporation JEAN-PIERRE MILLON (1) Former President and Chief Executive Officer PCS Health Systems, Inc. TERRENCE MURRAY (2) (4) Former Chairman of the Board and Chief Executive Officer FleetBoston Financial Corporation C.A. LANCE PICCOLO (3) Chief Executive Officer HealthPic Consultants, Inc. SHELI Z. ROSENBERG (2) (3) Former President, Chief Executive Officer and Vice Chairwoman Equity Group Investments, LLC THOMAS M. RYAN Chairman of the Board and Chief Executive Officer CVS Caremark Corporation RICHARD J. SWIFT (1) Former Chairman of the Board, President and Chief Executive Officer Foster Wheeler Ltd. (1) Member of the Audit Committee (2) \u0007Member of the Management Planning and Development Committee (3) \u0007Member of the Nominating and Corporate Governance Committee (4) Lead Director The Bank of New York Mellon c/o BNY Mellon Shareowner Services P.O. Box 358015 Pittsburgh, PA 15252-8015 Toll-free: (877) CVSPLAN (287-7526) E-Mail: shrrelations@bnymellon.com DIRECT STOCK PURCHASE/DIVIDEND REINVESTMENT PROGRAM BuyDIRECTSM provides a convenient and economical way for you to purchase your first shares or additional shares of CVS Caremark common stock. The program is sponsored andadministered by The Bank of New York Mellon. For more information, including an enrollment form, please contact: The Bank of New York Mellon at (877) 287-7526 FINANCIAL AND OTHER COMPANY INFORMATION The Company's Annual Report on Form 10-K will be sent without charge to any shareholder upon request by contacting: Nancy R. Christal Senior Vice President - Investor Relations CVS Caremark Corporation 670 White Plains Road - Suite 210 Scarsdale, NY 10583 (800) 201-0938 In addition, financial reports and recent filings with the Securities and Exchange Commission, including our Form 10-K, as well as other Company information, are available via the Internet at http://www.cvscaremark.com/investors. Financial Highlights fiscal year in millions, except per share figures Shareholder Information fiscal year 2010 2009 % change Net revenues $ 96,413 $ 98,729 -2.3% Operating profit $ $ -4.3% 6,165 Net income attributable to CVS Caremark $ 3,427 Diluted EPS attributable to CVS Caremark $ 2.49 Stock price at year-end $ 34.77 Market capitalization at year-end $ 47,423 6,438 $ 3,696 -7.3% $ -2.3% $ 2.55 32.21 +7.9% $ 44,841 +5.8% NET REVENUE in billions of dollars 98.7 96.4 100 DILUTED EPS ATTRIBUTABLE TO CVS CAREMARK in dollars ANNUAL DIVIDENDS DECLARED in cents per common share 3.0 0.35 87.5 30.5 2.55 2.49 76.3 80 35.0 2.18 2.4 25.8 0.28 60 40 1.8 1.60 1.2 0.14 20 0.6 0.07 0 0 0 06 07 08 09 10 06 07 08 09 10 SHAREHOLDER INFORMATION THOMAS M. RYAN Chairman of the Board and Chief Executive Officer EDWIN M. BANKS (1) (3) Founder and Managing Partner Washington Corner Capital Management, LLC CORPORATE HEADQUARTERS CVS Caremark Corporation One CVS Drive, Woonsocket, RI 02895 (401) 765-1500 C. DAVID BROWN II (2) (3) Chairman of the Firm Broad and Cassel ANNUAL SHAREHOLDERS' MEETING May 11, 2011 CVS Caremark Corporate Headquarters DAVID W. DORMAN (2) (3) Non-Executive Chairman of the Board Motorola Solutions, Inc. STOCK MARKET LISTING The New York Stock Exchange Symbol: CVS ANNE M. FINUCANE (3) Global Strategy and Marketing Officer Bank of America Corporation TRANSFER AGENT AND REGISTRAR Questions regarding stock holdings, certificate replacement/transfer, dividends andaddress changes should be directedto: TROYEN A. BRENNAN, M.D. Executive Vice President and Chief Medical Officer 0.21 15.5 43.8 DIRECTORS LARRY J. MERLO President and Chief Operating Officer 22.8 1.92 OFFICERS DAVID M. DENTON Executive Vice President and Chief Financial Officer 06 07 08 09 HELENA B. FOULKES Executive Vice President and Chief Marketing Officer 10 PER G.H. LOFBERG Executive Vice President and President - Caremark Pharmacy Services JONATHAN C. ROBERTS Executive Vice President and Chief Operating Officer - Caremark Pharmacy Services CVS Caremark is the largest pharmacy care provider in the United States with integrated offerings across the entire spectrum of pharmacy care. We are uniquely positioned to engage plan members in behaviors that improve their health and to lower overall health care costs for health plans, plan sponsors, and their members. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics, and we are a leading provider of Medicare Part D Prescription Drug Plans. As one of the country's largest pharmacy benefits managers (PBMs), we provide access to a network of approximately 65,000 pharmacies, including more than 7,100 CVS/pharmacy stores that provide unparalleled service and capabilities. Our stores fill nearly one in five retail DOUGLAS A. SGARRO Executive Vice President and Chief Legal Officer Our Vision LISA G. BISACCIA Senior Vice President and Chief Human Resources Officer We strive to improve the quality of human life. Our Mission JOHN M. BUCKLEY Senior Vice President and Chief Compliance Officer We provide expert care and innovative solutions in pharmacy and health care that are effective and easy for our customers. NANCY R. CHRISTAL Senior Vice President - Investor Relations Our Values LAIRD K. DANIELS Senior Vice President - Finance and Controller and Chief Accounting Officer ACCOUNTABILITY CAROL A. DENALE Senior Vice President and Corporate Treasurer We take ownership for our actions and the results. RESPECT prescriptions nationwide, and we have the #1 or #2 market share in 20 of the top 25 U.S. We treat customers and colleagues so they feel valued and appreciated. SARA J. FINLEY Senior Vice President and General Counsel drugstore markets. INTEGRITY STUART M. MCGUIGAN Senior Vice President and Chief Information Officer OPENNESS Puerto Rico. At year-end, we operated 7,182 retail drugstores, 560 MinuteClinic locations, We try new things that will lead to innovative and easy solutions for customers. 44 retail specialty pharmacy stores, 18 specialty mail order pharmacies and four mail order TEAMWORK pharmacies, and our CVS.com and Caremark.com Web sites. We share information and resources as we work together to deliver results. designed and produced by see see eye / Atlanta We do what we say and what is right. We employ approximately 201,000 associates in 44 states, the District of Columbia, and ZENON P. LANKOWSKY Corporate Secretary OFFICERS' CERTIFICATIONS The Company has filed the required certifications under Section 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of our public disclosures as Exhibits 31.1 and 31.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. After our 2010 annual meeting of stockholders, the Company filed with the New York Stock Exchange the CEO certification regarding its compliance with the NYSE corporate governance listing standards as required by NYSE Rule 303A.12(a). KRISTEN GIBNEY WILLIAMS (1) Former Executive Prescription Benefits Management Division of Caremark International, Inc. MARIAN L. HEARD (2) (3) President and Chief Executive Officer Oxen Hill Partners WILLIAM H. JOYCE (1) Chairman of the Board and Chief Executive Officer Advanced Fusion Systems, LLC LARRY J. MERLO President and Chief Operating Officer CVS Caremark Corporation JEAN-PIERRE MILLON (1) Former President and Chief Executive Officer PCS Health Systems, Inc. TERRENCE MURRAY (2) (4) Former Chairman of the Board and Chief Executive Officer FleetBoston Financial Corporation C.A. LANCE PICCOLO (3) Chief Executive Officer HealthPic Consultants, Inc. SHELI Z. ROSENBERG (2) (3) Former President, Chief Executive Officer and Vice Chairwoman Equity Group Investments, LLC THOMAS M. RYAN Chairman of the Board and Chief Executive Officer CVS Caremark Corporation RICHARD J. SWIFT (1) Former Chairman of the Board, President and Chief Executive Officer Foster Wheeler Ltd. (1) Member of the Audit Committee (2) \u0007Member of the Management Planning and Development Committee (3) \u0007Member of the Nominating and Corporate Governance Committee (4) Lead Director The Bank of New York Mellon c/o BNY Mellon Shareowner Services P.O. Box 358015 Pittsburgh, PA 15252-8015 Toll-free: (877) CVSPLAN (287-7526) E-Mail: shrrelations@bnymellon.com DIRECT STOCK PURCHASE/DIVIDEND REINVESTMENT PROGRAM BuyDIRECTSM provides a convenient and economical way for you to purchase your first shares or additional shares of CVS Caremark common stock. The program is sponsored andadministered by The Bank of New York Mellon. For more information, including an enrollment form, please contact: The Bank of New York Mellon at (877) 287-7526 FINANCIAL AND OTHER COMPANY INFORMATION The Company's Annual Report on Form 10-K will be sent without charge to any shareholder upon request by contacting: Nancy R. Christal Senior Vice President - Investor Relations CVS Caremark Corporation 670 White Plains Road - Suite 210 Scarsdale, NY 10583 (800) 201-0938 In addition, financial reports and recent filings with the Securities and Exchange Commission, including our Form 10-K, as well as other Company information, are available via the Internet at http://www.cvscaremark.com/investors. How Do You See CVS Caremark? CV S C A R E M A R K C O R P O R AT I O N Some think of us as the nation's leading drugstore chain, providing high-quality service and convenience in the pharmacy and front of the store. For others, we're a leading pharmacy benefits manager, improving outcomes and controlling costs for clients and plan members. 2010 ANNUAL REPORT One CVS Drive Woonsocket, RI 02895 401.765.1500 info.cvscaremark.com is this Two Pharmacists and a Nurse Practitioner - or A Whole New Way to Deliver Pharmacy Services ? CVS Caremark 2010 Annual Report Both are true, of course, but we see ourselves as something much more. CVS Caremark is the nation's largest pharmacy care company, and we take our leadership position seriously. In a period of unprecedented transition for the U.S. health care system, we're working to improve access and treatment in ways that no one else in our industry can. Benefiting from our retail footprint and the many investments we've made in technology, training, adherence programs, and retail clinics, we can help patients manage chronic disease more effectively than ever. We've already rolled out new services to accomplish this, and more are on the way. How you see CVS Caremark will change in a fundamental way in the coming years. We think you're beginning to see the evolution of pharmacy care. is this Your Neighborhood CVS Pharmacist - or A New Front Against Chronic Disease ? Today, CVS Caremark pharmacists are playing a larger role in improving health outcomes. Our pharmacists are uniquely positioned to help patients get the medicine right and get the behavior right, both of which are critical to lowering health care costs and improving health outcomes. To that end, the role of our retail pharmacists is expanding beyond primarily dispensing prescriptions. They are also providing services, such as flu vaccinations and face-to-face patient counseling on opportunities regarding medication adherence, closing gaps in care, and cost-savings. Through our Pharmacy Advisor program, which became broadly available to PBM clients in January 2011, we're providing these services for diabetic patients. Some clients are seeing 10 to 12 percent improvements in gap closures and similar increases in adherence. Pharmacy Advisor will address other chronic conditions beginning in 2012. - 1 - CVS Caremark 2010 Annual Report is this A $10 Generic Prescription - or Billions of Dollars in Cost Savings ? Generic drug substitution means good news for patients, health plan sponsors...and our bottom line. Since generic prescriptions cost far less than their brand-name counterparts, they play an important role in controlling costs for health plans, their members, and the uninsured. By 2012, an effective generic alternative will be available in every critical class of drugs. Our retail Customer Savings Initiative and PBM generic step therapies are just two ways in which CVS Caremark helps patients make the switch. In addition to providing major savings for payors and patients, generic drugs also provide significantly higher margins for pharmacy providers. As the nation's largest purchaser of pharmaceuticals, CVS Caremark is well-positioned to benefit as approximately $90 billion in branded drugs are expected to lose patent protection over the next five years. - 3 2 - is this Robert's 65th Birthday Party - or A Key Driver of Pharmacy Sales ? As baby boomers age, approximately 70 million Americans will turn 65 over the next 20 years. That's almost 10,000 people turning 65 every day! This demographic shift represents a significant opportunity for the pharmacy industry and CVS Caremark in particular. For starters, people 65 and older fill more than 25 prescriptions annually on average. That's three times the national average. An aging America will increase utilization dramatically for years to come and help drive the growth of both our PBM and retail businesses. The graying U.S. population is also likely to drive the Medicare Part D sector. As one of the nation's leading providers of Medicare Part D prescription drug plans and other Medicare Part D services, we see this as an important growth area in the years ahead. - 3 - CVS Caremark 2010 Annual Report is this A Pharmacist Filling a Prescription - or State-of-the-Art Technology at Work ? We've made significant IT investments to support the services our pharmacists provide. With customer satisfaction scores in our pharmacies at an all-time high, it appears to be money well spent. For example, in 2010 we completed the rollout of our proprietary RxConnectTM retail pharmacy system that has dramatically boosted efficiency. We also launched our Consumer Engagement EngineTM last year. When integrated with RxConnect, it provides the technology platform that enables programs such as Pharmacy Advisor and will support future clinical advances. With the ability to target our key points of contactour retail pharmacies, mail order pharmacies, and call centersthis technology helps us encourage patients to remain compliant with prescribed medications and close gaps in care. The result? Better health and lower overall health care costs. - 5 4 - is this A Variety of Specialty Prescriptions - or Pharmacy's Fastest-Growing Sector ? Specialty pharmacy expenditures are expected to rise to $100 billion annually by 2015. Only three of the top 10 drugs in the U.S. in 2006 were specialty drugs, which require complex and expensive therapies. By 2014, it is estimated that they will comprise eight of the top 10. With more than $11 billion in specialty revenues annually, CVS Caremark is well-positioned to capture this growth opportunity. We are a recognized leader in the specialty industry, with over 30 years of experience. Specialty drugs can be difficult to administer and can cause challenging side effects, requiring closer communication between pharmacists and patients. Our network of specialty pharmacies leverages a team of specialized clinical pharmacists to support these patients. Through our growing Specialty Guideline Management program, we're also helping PBM clients reduce unnecessary treatment and control their specialty spending. - 5 - CVS Caremark 2010 Annual Report is this Kim's DNA Test Result - or An Exciting Treatment Breakthrough ? We've taken a leadership role in pharmacogenomic testing and clinical services. Through our majority stake in Generation Health, we plan to make genetic benefit management an integral part of our PBM offering. The emerging field of pharmacogenomics focuses on providing the right drug and dosage to the right patient. By identifying how an individual's genetic variations are likely to impact his or her response to a particular treatment, we can minimize adverse drug reactions and avoid wasted drug spend. The market for targeted therapies is expected to reach $21 billion by 2015. We're currently testing the efficacy of 13 drug therapies, and initiatives such as these are truly advancing the science of pharmacy care. - 7 6 - is this Relief for Late-Night Coughing Fits - or Our Focus on Convenience in Action ? More than 65 percent of our stores are open round-the-clock or offer extended hours. That's welcome news when a family member suddenly takes ill or a late-night grocery run gets added to your to-do list. And it's just one of the many ways in which we strive to make our stores CVS easy. Over 60 percent now have drivethru windows in the pharmacy, which parents appreciate if they have a child sleeping in the back seat. We understand the premium that our customers place on convenience. In fact, it's a key driver of our ambitious real estate program. In the markets where we operate, 75 percent of the population lives within three miles of a CVS/pharmacy. Moreover, we continue to open new locations and relocate others to improve access. Over the next three years, we expect to open approximately 150 net new stores annually. - 7 - CVS Caremark 2010 Annual Report are these Less Expensive, Quality Alternatives - or Valuable Front-Store Profit Drivers ? CVS shoppers can find more than 5,000 store brand items in our stores. In these challenging economic times, our customers appreciate the wide array of products we offer under our store brand and CVS-exclusive brands. Such items now account for more than 17 percent of sales in the front of the store, and that figure should continue to rise. With their ExtraCare Health Cards, our PBM plan members save even more on many CVS brand overthe-counter products. Despite their lower prices, our store brand products provide us with higher margins than their national brand equivalents. That's why we add approximately 900 new items every year and continue to refine our store brand strategy. In fact, February 2011 marked the introduction of the first 100 products under our new, value-priced Just the BasicsTM brand. - 9 8 - is this A Way to Enjoy Easy Savings - or A Key to More Effective Marketing ? More than 67 million customers use their ExtraCare card in our stores and online. The largest loyalty program among all retailers, ExtraCare makes it easy for shoppers at our more than 7,100 locations to take advantage of weekly sales. Cardholders also receive targeted offerings and quarterly Extra Bucks rewards. We've taken our ExtraCare program to a new level with the recent launch of the ExtraCare Beauty Club, which provides additional benefits. ExtraCare has helped us build a loyal customer base and represents a significant competitive advantage. It has enabled us to learn more about customer shopping patterns over the last decade and provides valuable insights that are helping us continue to innovate, ensure that each store's product offerings match neighborhood shopping needs, and use our advertising dollars effectively. - 9 - CVS Caremark 2010 Annual Report is this A Convenient MinuteClinic - or Help for a Crowded Health Care System ? Since its inception in 2000, MinuteClinic has treated nearly 9 million patients. The leading provider of retail health care, we now have 560 clinics and counting in CVS/pharmacy locations across 26 states and the District of Columbia. And approximately 80 percent of visits are now covered by insurance. Building on our success in acute care, we've made monitoring of chronic conditions such as diabetes, hypertension, and cholesterol a priority. We've been busy forging alliances with highly regarded health care providers and bringing new products and services to market. MinuteClinic can also help ease health care overcrowding caused by the growing shortage of primary care doctors. That's why we're adding locations in existing markets and entering others, with the number of MinuteClinics expected to exceed 1,000 over the next five years. - 10 - Greater convenience and choice Improved health outcomes Lower overall health costs CVS/pharmacy MinuteClinic We are the clear leader in the retail clinic business. Our 560 locations across the country have seen nearly 9 million patients to date. Our more than 7,100 retail stores allow us to connect with 5 million people every day, something no other PBM business can match. We serve over 2,200 clients with approximately 60 million plan members, and our clinical offerings lead the industry. Generation Health We entered the pharmacogenomics space with an investment in Generation Health in 2009, and this offering is now broadly available to clients. CVS Caremark Pharmacy Services Caremark Mail CVS Caremark Specialty Pharmacy We operate one of the largest mail order pharmacy businesses in the U.S., which provides costeffective, convenient delivery of maintenance medications. We operate the largest specialty pharmacy business in the country, and this is the fastest-growing sector of our industry. With capabilities across the entire spectrum of pharmacy care, CVS Caremark can drive improved patient outcomes and lower overall health costs more effectively than anyone else in our industry. More than a leading PBM and drugstore chain, our strengths extend to areas that include retail clinics, Medicare Part D, specialty pharmacy, and pharmacogenomics. And that's good news for our clients, plan members, customers, and investors. - 11 - CVS Caremark 2010 Annual Report DEAR FELLOW SHAREHOLDER: U.S. health care costs are expected to rise 6 percent annually over the next decade, pushing the total spent in the United States to around $5 trillion in 2020. The alarming growth of chronic disease in an aging U.S. population will drive much of this increase, and companies that can find a way to help employers, insurers, and plan members rein in the related costs are poised to benefit. At CVS Caremark, we see a significant opportunity to reduce the nearly $300 billion that is spent annually as a result of non-adherence to prescribed medications and other forms of sub-optimal pharmacy care. As the nation's largest pharmacy health care provider, we can accomplish this through our differentiated PBM offerings, our leadership in clinical programs and specialty pharmacy, our unmatched retail footprint, and our growing base of MinuteClinic locations. Our strategy is to utilize these elements of our integrated pharmacy services model to lower health care costs while improving the health of those we serve. It's important to remember that pharmacy care remains one of the most cost-effective ways of treating disease, so we are well-positioned to slow the rise in health care costs even as we encourage appropriate utilization of prescription drugs. We'll have more to say on this topic and the state of our business in general. Let's start, though, with a quick overview of the past year's performance. THOMAS M. RYAN (right) Chairman of the Board and Chief Executive Officer LARRY J. MERLO (left) President and Chief Operating Officer Our 2010 Financial Performance and Commitment to Enhancing Shareholder Value 2010 marked a year of substantial progress for our company despite continued challenges in the broader economy. We successfully navigated through a challenging retail and consumer environment, delivering industry-leading same-store sales growth, solid expense control, and significantly - 13 12 - improved retail operating margins. However, we faced and are very pleased with our progress to date. Our some well-documented challenges in our PBM busi- client satisfaction rate remained high and we saw a ness, and we are disappointed with our performance. 97 percent retention rate during the season. We also Total revenue decreased 2.3 percent to $96.4 billion, with added a significant amount of net new business, with income from continuing operations down 7.2 percent to revenues totaling approximately $9.4 billion. The 2012 $3.4 billion. We will talk more about the steps we are selling season is off to a good start as well. taking to turn around PBM performance. Clients are enthusiastic about our differentiated CVS Caremark shares returned 7.9 percent in 2010, offerings, which enjoyed positive momentum in trailing the 12.8 percent return of the S&P 500 Index. the 2011 selling season. Maintenance Choice, which Our below-market share performance is unacceptable, gives plan participants the option of filling their 90-day and enhancing shareholder returns remains a top priority maintenance prescriptions by mail or at one of our for us. Accordingly, we returned more than $1.9 billion to convenient retail locations, has been adopted by our shareholders last year through a combination of share approximately 600 clients representing 7.4 million lives. repurchases and dividends. We were able to accom- Our generic step therapy programs have been adopted plish this as a result of the $3.3 billion in free cash flow by 170 clients representing 5.5 million lives. Our newest we generated in 2010, a 7.6 percent increase over 2009. addition, the Pharmacy AdvisorTM program, has already been adopted by PBM clients representing more than We expect our cash-generation capabilities to increase 10 million lives, or approximately 20 percent of our substantially in the coming years due to anticipated PBM book of business. earnings growth and a sweeping initiative to reduce working capital. We will take a disciplined approach to The 12-year agreement we landed in July to provide deploying the substantial cash we generate to achieve Aetna with a broad range of PBM services marked a the highest possible return for our shareholders. We watershed for our company. The result of an extensive will invest in high-return projects and expect to continue competitive bidding process, it provides significant returning value to our shareholders in the form of validation of our core PBM capabilities as well as the dividends and value-enhancing share repurchases. To benefits we bring to the table through our integrated that end, we recently raised our dividend by 43 percent, model. Once fully implemented, CVS Caremark will making this our eighth consecutive year with a dividend serve approximately 9 million Aetna PBM members increase. We also expect to complete our $2 billion and administer approximately $9 billion in annual drug authorized share repurchase during 2011. spending. In addition to taking over management of Aetna's retail pharmacy network as well as pharmacy Long-Term Agreement with Aetna Highlights Strong 2011 PBM Selling Season customer and member service functions, CVS Caremark will also handle purchasing, inventory management, As we said, we have begun to take steps to turn around the performance of our PBM. After experiencing contract losses in the 2010 PBM selling season, we undertook a series of steps to stabilize and grow our PBM, and position the business for long-term success. We re-established momentum in the 2011 selling season and prescription fulfillment for Aetna's mail-order and specialty pharmacy operations. We see significant upside opportunity from this relationship over time, as we work together to offer our unique products that will help lower overall health care costs and improve health outcomes for members. - 13 - CVS Caremark 2010 Annual Report LETTER TO S H A R E H O L D E R S ( C O N T I N U E D ) We Are Streamlining Operations and Are Strategically Positioned in High-Growth Businesses Medicare. In fact, we expect the Medicare Part D market While we expect to see a decline in PBM operating through 2020. Our size and capabilities position us to profit in 2011, we are optimistic about our PBM's capitalize on this opportunity, and we have a dedicated long-term prospects and believe we are well-positioned group with new leadership to focus our efforts. to navigate the challenges and opportunities facing the industry in the coming years. Among our priorities, we have begun implementing a PBM streamlining initiative to improve our workflow and align our cost structure more closely with peers. The PBM, much like CVS on the retail side, went through significant acquisition activity over the past decade, and there are still many opportunities to build a more cohesive, efficient, and streamlined organization. This PBM initiative is expected to deliver more than $1 billion in savings between 2011 and 2015. to grow 8.5 percent annually, on average, from 2010 In anticipation of this continued growth, we recently announced an agreement to acquire Universal American's Medicare Part D business for approximately $1.25 billion. This transaction is subject to customary closing conditions, including regulatory approval, as well as approval by Universal American shareholders. Upon closing, it would more than double the size of our prescription drug plan (PDP) business to more than three million members and make us a strong #2 player in Medicare Part D. The deal is expected to close at the end of the We also have all the capabilities in place to increase second quarter of 2011. We expect to benefit from the our revenues and expand our market share. For addition of Universal American's Medicare Advantage example, let's take a look at specialty pharmacy. We Prescription Drug Plan (MA-PD) insurance business currently generate more than $11 billion in specialty beginning in 2011 and to begin servicing the PBM pharmacy revenue annually, making us the largest contracts for both the PDP and Universal American's specialty pharmacy provider in the U.S. Through our MA-PD business beginning in January 2012. industry-leading Specialty Guideline Management Pharmacy Advisor Utilizes Our Retail Footprint to Improve Care and Control Costs program, we facilitate appropriate utilization across disease states and help clients control their specialty We are very excited about the rollout of our Pharmacy spending. Specialty is also the fastest-growing phar- Advisor program early in 2011. It will help us add value macy sector, with a compound annual growth rate for our PBM clients and improve the health of plan of approximately 12 percent expected over the members. Leveraging our retail presenceunique next five years. among major PBMswe can offer chronically ill CVS Caremark is also a very significant player in the patients the benefit of face-to-face counseling in our Medicare Part D business, one of the fastest-growing pharmacies to improve their medication adherence areas of the PBM space. While our 2010 results reflect rates and close gaps in care. Based on our research the negative impact from a disappointing Medicare Part and the pilot program for diabetes patients that we D competitive bidding process for the 2010 plan year completed in 2010, in-store counseling helps close and regulatory changes that reduced our profitability, we gaps in care at nearly twice the rate of phone counsel- view Medicare Part D as an integral part of our long-term ing alone. Using Pharmacy Advisor, a PBM client with strategy. A growing portion of the population will 50,000 employees whose population has an average receive its prescription drug coverage under Medicare prevalence of diabetes could save approximately plans, driven by age demographics and the anticipated $3.3 million a year in medical expenditures. shift of retirees from employer-based coverage to - 15 14 - We've spent the past three years developing and over the past year at bringing new products and implementing the technology that makes Pharmacy services to market that help manage chronic conditions. Advisor possible. Utilizing clinical rules, our Consumer We expect to incorporate these new capabilities into Engagement Engine identifies cost savings or health our PBM plan offerings. As we move into the care of improvement opportunities for PBM plan members patients with chronic disease, we have also established whether they interact with us at our retail and specialty formal affiliations with some of the country's leading pharmacies, through our mail order pharmacies, or health systems to collaborate on patient care. using our Web sites. We've made diabetes intervention our initial priority. In the future, Pharmacy Advisor will also address issues related to coronary artery disease, congestive heart failure, hypertension, hyperlipidemia, and other chronic illnesses. We expect health care reform to bring some form of coverage to 32 million people who are currently uninsured. MinuteClinic will help meet the growing demand for care and mitigate the growing shortage of primary care physicians. We will begin adding approximately Our MinuteClinic Offerings and Footprint Will Expand to Meet Growing Demand 100 new clinics annually over the next five years. We will Our 560 MinuteClinic locations represent another markets in existing states, with plans to enter new states important aspect of our unique value proposition. beginning in 2012. start by filling in existing markets as well as adding new Non-flu vaccination visits to MinuteClinic increased by 22 percent in 2010. We have really focused our efforts A Message From Tom Ryan This annual report marks the end of my tenure as Chairman and Chief Executive Officer of CVS Caremark. It is hard for me to believe that more than 35 years have passed since I joined what was then CVS/pharmacy as a pharmacist. It has been a remarkable journey both for me and for the company. We've evolved from a relatively small regional drugstore chain to become the largest pharmacy health care provider in the United States. In doing so, we've made a positive difference in the lives of our millions of loyal customers. I take a lot of pride in what we've accomplished, and the credit goes to an extraordinary management team and workforce composed of some of the most talented and committed people in our industry. I want to thank the Board of Directors and all my colleagues for their support and wise counsel over the years. Among them, I've been extremely fortunate to work alongside incoming CEO Larry Merlo for more than 20 years. Larry has consistently delivered outstanding results in every position he has held with the company, and I know he will do an outstanding job as our new CEO. Once again, it was an honor and a privilege to lead our company for the past 17 years. Thank you. - 15 - CVS Caremark 2010 Annual Report LETTER TO S H A R E H O L D E R S ( C O N T I N U E D ) Industry-Leading Performance Across Several Measures Characterizes the Year in Retail As we accomplished with earlier acquisitions, we have Our retail stores continued to outperform competitors we purchased in 2008 across several key financial metrics. and gain share in 2010, and we expect a similar out- By leveraging our systems, our focus on store brands, come in 2011. We led the industry with 2.1 percent our category mix, and our ExtraCare loyalty card, same-store sales growth; 2.9 percent in the pharmacy profitability in the Longs stores has improved signifi- and 0.5 percent in the front of the store. We also outper- cantly. In addition, average store prescription volumes formed all drugstore chains in sales per square foot have increased by more than 5 percent. Given the and profitability measures. much larger retail footprint and sales mix of the improved the performance of the Longs Drugs stores acquired stores, we do not expect them to match the We opened 285 new or relocated stores in 2010. sales productivity of our core CVS/pharmacy locations. Factoring in closings, net units increased by 152 stores, That said, we see significant upside and expect to close which equates to 2.9 percent retail square footage the gap further over the next several years. growth. Over the next three years, we expect to add approximately 150 net new stores annually. That would In the front of the store, our ambitious store brand increase our retail square footage growth each year by program generated more than $3 billion in sales in 2010. 2 to 3 percent. CVS/pharmacy entered nine new markets Store brands now account for 17 percent of our front-end over the past two years, and results have exceeded our total, and we believe that penetration can reach more expectations. In 2010 alone, we opened our first stores in than 20 percent in the next two to three years. From Memphis, Omaha, St. Louis, and Puerto Rico. over-the-counter drugs to grocery items, we offer more A Message From Our Board of Directors As Tom Ryan prepares to step down from his role as Chairman and Chief Executive Officer of CVS Caremark, the Board of Directors wants to thank him for the enormous contributions he has made to the growth and culture of our company over the past 35 years. Tom became President and CEO of CVS in 1994 when the company had approximately 1,200 stores and was still a division of Melville Corporation. After overseeing several very successful retail acquisitions over the years, Tom engineered the evolution of our model beyond retail pharmacy to include MinuteClinic and the transformational merger with Caremark in 2007. Today, CVS Caremark is the nation's largest pharmacy care provider and the 18th-ranked company on the Fortune 500. We operate more than 7,100 stores and a top-tier PBM that together generated more than $96 billion in revenue in 2010. Since Tom took the helm, our market cap has grown from $4 billion to roughly $45 billion, and we have averaged an 11.5 percent annual return to shareholders. Tom also developed many key executives and assembled a talented team, including incoming CEO Larry Merlo. We are pleased to have Larry assume the top spot and confident in his abilities to successfully lead the company forward. We wish Tom all the best as he begins the next phase of his life. 17 - - 16 than 5,000 store brand items that are less expensive for dedication and hard work. We have a sense of urgency, shoppers and help create loyalty. They provide us with an engaged workforce, the right assets, and the right higher margins as well. Their excellent value has certainly technology. We are extremely well-positioned to play appealed to consumers in this challenging economic an important role in the evolving U.S. health care environment. Moreover, many of our store brand offer- market, and we are committed to driving strong growth ings are far more than just \"me too\" versions of national and returns to shareholders. On behalf of our Board of brands. We've actually introduced products that either Directors and our 201,000 devoted associates across have no national-brand equivalent or offer innovative the nation, thank you for your continued support. packaging that appeals to more than the just the Sincerely, price-sensitive shopper. We expect to add around 900 new store brand offerings in 2011. The ExtraCare loyalty program remains one of the main drivers of our industry-leading performance in the front of the store. The largest loyalty program among all U.S. retailers, it now boasts more than 67 million active Thomas M. Ryan cardholders. In 2010, they received $3.2 billion in Chairman of the Board and Chief Executive Officer ExtraCare savings and Extra Bucks rewards. Our 10 years of experience working with ExtraCare enables us to fine tune our promotional programs and spend our advertising dollars most efficiently and Larry J. Merlo effectively. It also helps us tailor our merchandise mix President and Chief Operating Officer to best suit customers' needs and improve productivity. We are currently developing some new customized store layouts based on our research and have already recon- February 18, 2011 figured several locations. In our \"urban cluster\" stores, where the front end can exceed 40 percent of sales, we have added assisted self-checkouts to improve checkout speed and expanded certain categories such as baby and grocery. We have converted more than 200 such stores to date. The early results are promising, with trips, sales, and margins all up significantly. We are in testing phase with two additional clusters and look forward to sharing more information on our results as we delve further into this opportunity for future growth. In closing, we operate in a dynamic and growing industry. Over the past few years, we have set up an infrastructure that will position the company to be very productive for years to come. We want to take this opportunity to thank our colleagues for their - 17 - CVS Caremark 2010 Annual Report Community With the economy intensifying the nonprofit sector's support programs that help improve the quality of life need for support, 2010 was a pivotal year for CVS for children with autism. We also donated to nonprofits Caremark and the CVS Caremark Charitable Trust. Our that provide independent living skills. For example, collective support made a real difference in 2010 and United Cerebral Palsy of Southeastern Wisconsin Inc. positively demonstrated our company's values to all was awarded a grant for its training and support program stakeholders. We supported more than 1,200 nonprofit designed to help youth with disabilities, ages 14 to 21, organizations and touched over 2.5 million lives in two successfully transition into adulthood. primary areas of focus: children with disabilities and Given the high number of Americans without health access to health care for the uninsured. insurance, access to health care also remains an impor- This year marked the sixth consecutive year of the tant area for the Trust. Grants totaling approximately CVS Caremark All Kids Can Baseball Camps at the $1.1 million will fund a wide range of services from iconic Fenway Park. Nine camps over the course of routine medical exams to helping diabetics manage the baseball season gave hundreds of children with their disease. In Texas, the YWCA will use our support disabilities from across New England an action-packed, to fund its Women's Health program that provides free dream-fulfilling experience of playing ball at Fenway mammograms for uninsured or underinsured women. and working one-on-one with Red Sox Batting Coach Our CVS/pharmacy in-store fundraising campaigns Dave Magadan. collected nearly $10 million in 2010, with colleagues Through our signature philanthropic program, All Kids and customers supporting partners such as St. Jude Can, we also support nonprofit organizations that are Children's Research Hospital, the March of Dimes, making life easier for children with disabilities. One and the ALS Therapy Alliance. of our national partners is Boundless Playgrounds, an We also made meaningful contributions in the area of organization dedicated to building accessible, inclusive disaster relief. Closest to the hearts of our headquarters playgrounds in communities across America. To date, CVS Caremark has supported 65 inclusive playgrounds in the markets where our customers, clients, and colleagues live and work. Twenty-three were completed in 2010. Through the CVS Caremark Charitable Trust, we employees, the Trust responded to historic flooding in Rhode Island with donations to the American Red Cross and to the United Way of Rhode Island. We also responded to the earthquake in Haiti by donating $175,000 to nonprofit partners providing relief. continued to find opportunities to invest in specific areas across a broad range of communities. In 2010, CVS CAREMARK DOWNTOWN 5K 72 grantees received a total of $3.3 million in support. Providence, RI About half of these grants aligned with the efforts This annual event features 21 different races for children pre-kindergarten through eighth grade as well as the All Kids Can inspirational event, a 200 meter race for children with physical and intellectual disabilities. of All Kids Can. Among them, we allocated funds to VILLA ESPERANZA SERVICES Pasadena, CA CVS Caremark associates visit Villa Esperanza Servicesone of the 2010 CVS Caremark Charitable Trust granteesmaking a positive impact by providing occupational therapy to children with developmental disabilities. - 18 - 2010 Financial Report 20 Management's Discussion and Analysis of Financial Condition and Results of Operations 43 Management's Report on Internal Control Over Financial Reporting 44 Report of Independent Registered Public Accounting Firm 45 Consolidated Statements of Income 46 Consolidated Balance Sheets 47 Consolidated Statements of Cash Flows 48 Consolidated Statements of Shareholders' Equity 50 Notes to Consolidated Financial Statements 74 Five-Year Financial Summary 75 Report of Independent Registered Public Accounting Firm - 19 - CVS Caremark 2010 Annual Report Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and Cautionary Statement Concerning Forward-Looking Statements that are included in this Annual Report. Overview of Our Business CVS Caremark Corporation (\"CVS Caremark\