Merlo made $32.3M in ’14, CVS prospers at end of tobacco sales

CVS HEALTH PRESIDENT and CEO Larry J. Merlo earned $32.3 million in 2014, as the retail pharmacy and benefit management company was not hurt by its decision to end the sale of tobacco sales in the fall of 2014. / CVS HEALTH/JASON GROW
CVS HEALTH PRESIDENT and CEO Larry J. Merlo earned $32.3 million in 2014, as the retail pharmacy and benefit management company was not hurt by its decision to end the sale of tobacco sales in the fall of 2014. / CVS HEALTH/JASON GROW

WOONSOCKET – Top executives at CVS Health Corp. are reaping the benefits of an overall lucrative 2014 that exceeded analysts’ predictions after the company elimination of about $2 billion in tobacco sales, according to a federal filing.

President and CEO Larry J. Merlo in 2014 was paid $32.3 million in total compensation, representing a 3.3 percent increase from a year earlier, according to the company’s annual proxy statement filed Monday with the U.S. Securities and Exchange Commission.

His earnings included a base salary of $1.3 million, $6.8 million in stock awards, $4 million in option awards and $11.5 in a non-equity incentive plan. Merlo also realized a gain of about $11 million on stock awards from previous years as well as $8.9 million in gains on the exercise of previously awarded stock options.

Merlo, 59, became chief executive in March 2011 and has been president since May 2010. He’s been with the company and it subsidiaries for more than 30 years and in an open letter to fellow stockholders he lauded a successful 2014, which yielded shareholder returns of 36.5 percent.

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“By any measure, 2014 was a milestone year for CVS Health,” Merlo wrote.

Last year CVS eliminated the sale of tobacco products from its retail stores, which the company estimates brought in roughly $2 billion in annual revenue. In its first full quarter without tobacco sales – the fourth quarter of last year – the company recorded a 13 percent increase in sales finishing at $37.1 billion, which topped analysts’ averaged projection of $36 billion.

The company says revenue in 2014 increased 9.9 percent to a record $139.4 billion from $126.8 billion in 2013.

The move away from tobacco won favor with consumers, but a severe flu season paired with a growth in prescription drug sales – brought on in part because of the millions of newly-insured through the Affordable Health Care Act – helped make up for the loss and drove customers to the company’s 7,800 drugstores.

Instrumental in the removal of tobacco and the rebranding of CVS Health from CVS Caremark was executive newcomer Helena B. Foulkes, who became executive vice president and president of CVS/pharmacy in January 2014. She previously held the title of chief health care strategy and marketing officer.

Foulkes in 2014 was paid $6 million in total, which included an $850,000 base salary, $1.25 million in stock awards and $3.17 million in a non-equity incentive plan.

The company also credits Foulkes with successfully opening and relocating 211 new stores, according to the filing.

David M. Denton, executive vice president, chief financial officer, was the second highest paid executive with $14.7 million. Jonathan C. Roberts, executive vice president and president of CVS/caremark was paid $7.69 million and Thomas M. Moriarty, executive vice president, chief health strategy officer and general counsel, was paid $5.42 million.

CVS Health announced its annual meeting of stockholders, which will be held at 9 a.m. on May 7 in company headquarters at One CVS Drive, Woonsocket.

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