CVS 1999 Annual Report Download - page 40

Notes to Consolidated Financial Statements
38
CVS Corporation
Business Segments
The Company currently operates four business segments:
Retail Pharmacy, Pharmacy Benefit Management (“PBM”),
Specialty Pharmacy and Internet Pharmacy. The Company’s
business segments are operating units that offer different
products and services, and require distinct technology and
marketing strategies.
The Retail Pharmacy segment, which includes 4,086 retail
drugstores located in 24 states and the District of Columbia,
operates under the CVS/pharmacy name. The Retail
Pharmacy segment is the Company’s only reportable
segment.
The PBM segment provides a full range of prescription
benefit management services to managed care and other
organizations. These services include plan design and
administration, formulary management, mail order pharmacy
services, claims processing and generic substitution. The
PBM segment operates under the PharmaCare Management
Services name.
The Specialty Pharmacy segment, which includes a mail
order facility and 12 retail pharmacies located in 9 states
and the District of Columbia, operates under the CVS
ProCare name. The Specialty Pharmacy segment focuses on
supporting individuals who require complex and expensive
drug therapies.
The Internet Pharmacy segment, which includes a mail
order facility and a complete online retail pharmacy,
operates under the CVS.com name.
The accounting policies of the segments are substantially
the same as those described in Note 1. The Company
evaluates segment performance based on operating profit
before the effect of nonrecurring charges and gains and
intersegment profits.
Following is a reconciliation of the significant components
of the Retail Pharmacy segment’s net sales for the respective
fiscal years:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 5
1999 1998 1997
Pharmacy 58.7% 57.6% 54.7%
Front store 41.3 42.4 45.3
Total net sales 100.0% 100.0% 100.0%
Following is a reconciliation of the Company’s business segments to the consolidated financial statements:
Retail Pharmacy All Other Intersegment Other Consolidated
In millions Segment Segments Eliminations(1) Adjustments(2) Totals
1999:
Net sales $ 17,625.7 $ 888.4 $ (415.8) $ — $ 18,098.3
Operating profit 1,120.4 15.1 — — 1,135.5
Depreciation and amortization 274.6 3.3 — — 277.9
Total assets 7,146.1 173.4 (44.1) — 7,275.4
Capital expenditures 477.1 16.4 — — 493.5
1998:
Net sales $ 15,081.1 $ 488.4 $ (295.9) $ — $ 15,273.6
Operating profit 927.8 12.7 — (188.6) 751.9
Depreciation and amortization 248.6 1.1 — — 249.7
Total assets 6,602.1 119.6 (35.5) — 6,686.2
Capital expenditures 498.0 4.3 — — 502.3
1997:
Net sales $ 13,649.4 $ 320.7 $ (220.5) $ — $ 13,749.6
Operating profit 771.2 7.9 — (497.4) 281.7
Depreciation and amortization 237.8 0.4 — — 238.2
Total assets 5,878.9 60.6 (19.0) — 5,920.5
Capital expenditures 339.6 2.0 — — 341.6
(1) Intersegment eliminations relate to intersegment sales and accounts receivables that occur when a Pharmacy Benefit Management segment customer uses a Retail
Pharmacy segment store to purchase covered merchandise. When this occurs, both segments record the sale on a stand-alone basis.
(2) Other adjustments relate to the merger, restructuring and other nonrecurring charges. These charges are not considered when management assesses the stand-alone
performance of the Company’s business segments.