The Annual Report Project
CVS annual Report


A- Introduction:
? Name of the chief executive officer: Tom Ryan
? Location of the home office: Florida
? Ending date of the latest fiscal year: January 1, 2005.
? Description of the company?s principal products: operates in the retail drugstore industry in the United States. The Company operates in two segments: Retail Pharmacy and Pharmacy Benefit Management (PBM). The Company sells prescription drugs and an assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, film and photo finishing services, seasonal merchandise, greeting cards and convenience foods, through its CVS/pharmacy retail stores.
? Main geographic area of activity: United States of America (36 states).
? Name of the Auditor and his opinion regarding the financial statements: KPMG LL : these financial statement represented fairly in accordance with the standards of the public company Accounting oversight Board (United States).
? The most recent price of the company?s stock was 45.07 on December 31st , 2004.
? The dividend per share was $0.265 on January 1st , 2005.

b- Industry situation and company plans:
There was a temporary slowdown in industry prescription growth, which is due to number of factors. They include the slow pace of new drug approvals, higher co-pays and growing co-insurance arrangements. The industry is hard at work discovering new drugs.

The company expect to be significant participants in delivering the Medicare Prescription Drug. Also the company looks forward to improving customer satisfaction, opining new stores, and driving productivity.






C- Financial Statements
? Income Statement: Multiple Step income statement
2004 2003 Change % of change
Gross profit 8,031.2 6863 1168.2 17%
Income from operation 1454.7 1423.6 31.1 2.2%
Net income 918.8 847.3 71.5 8.4%

The corporation enjoyed increasing gross profit, income from operation, and net income by 17%, 2.2%, and 8.4% respectively, so performance strengthened in 2004.

? Balance Sheet:

2004

Assets = Liabilities + Stockholders equity
$14,546.8 = 7559.6 + 6987.2


2003

Assets = Liabilities + Stockholders equity
$10,543.1 = 4521.3 + 6,021.8


? Cash flow statement

2004 2003
Net Income $918.8 $847.3
Cash flows from operations 914.2 968.9

So in 2004 the net income is more than the cash flows from operations, but in 2003 the net income is less than the cash flows from operations.


Investing Activities

The cash flows from investing activities showed that the corporation was expanding through investing activities because the net cash flow from investing activities for both years were negative, (3,163.3) for 2004 and (753.6) for 2003. From this section of the cash flow statement we can notice that during 2004 the corporation heavily invested in acquisitions, net of cash and investments.

Financing Activities

The most important source of financing were short term and long term debt, that for 2004 were 1204.1 and 885.6 respectively, but in 2003 the corporation did not take any additional loans.


From the cash flow statement showed the following change in cash for the last two years:

2004 2003 Overall
Increase (Decrease) (450.9) 142.8 (308.1)

So in 2004 the cash decreased by $450.9, but in 2003 it was increased by $142.8 and the overall decrease in cash was $308.1.

D- Accounting Policies:

? Revenue Recognition: the corporation recognizes revenue from the sale of Inventory at the time of sale, and the service revenue is recognized at the time service is provided.
? Cash and cash equivalent: consist of cash and temporary investments with maturities of three months or less when purchased.
? Merchandise Inventory: Stated at the lower of cost or market (LCM) on a first in first out (FIFO) basis.
? Property, plant, and Equipment: Recorded at historical cost and depreciated using straight line method (SLM).
? The topics of the notes to the financial statements:
1- Significant Accounting policies.
2- Acquisition .
3- Goodwill and other intangibles.
4- Borrowing and Credit agreements.
5- Leases.
6- Employee stock ownership plan.
7- Pension plans and other postretirement benefits.
8- Stock incentive plans.
9- Commitments and Contingencies.
10- Income taxes.
11- Business segments.
12- Reconciliation of earnings per common share.
13- Quarterly financial information.

E- Financial Analysis:

(c)
Liquidity ratios:
? Working Capital= Current assets - Current Liabilities

2004 =$ 7919.5 ? 4858.8= $3060.7
2003 =$ 6496.5- 3489.2 = 3007.3
The corporation has $3060.7 liquid assets in 2004, and $3007.3 in 2003 to build its business, so this indicates that the corporation is successful because it can expand and improve their operations.


? Current ratio =

2004 2003
Current Assets $ 7919.5 $ 6496.5
Current Liabilities $ 4858.8 $ 3489.2
Current Ratio 1.63 1.86

In 2004 there are $ 1.63 available to meet each $1 of current maturing obligations, but in 2003 there are $1.86 to meet the current maturing obligations.












? Receivables turnover = Sales
A/R


2004 2003
Sales $ 30594.3 $ 26588
Account receivables $ 1764.2 $ 26588
Receivables turnover 17.34 19.7

The corporation collected the account receivables in average 19.7 time in 2003, but this number decreased to 17.34 time in 2004.

? Days sales Uncollected = Account receivables X 360
Sales
2004 2003
Account receivables $ 1764.2 $ 26588
Sales $ 30594.3 $ 26588
Days sales Uncollected 20.76 days 18.27 days
The number of days? sales uncollected increased from 18.27 days to 20.76 days in 2004.

While none of these changes occurred from 2003 to 2004 appear dramatic, it seems that the