CVS 2001 Annual Report Download - page 31

2001 Annual Report
Business Segments
The Co mpany currently o perates two business seg ments,
Retail Pharmacy and Pharmacy Benefit Management ( “ PBM” ) .
During 2001, the Co mpany changed its repo rting structure and as
a result, the Spec ialty Pharmacy business and the Internet
Pharmacy business are no lo nger co nsidered to be business
segments. The Specialty Pharmacy business is no w a co mpo nent
of the PBM segment and the Internet Pharmacy business a
co mpo nent o f the Retail Pharmacy segment. Prior year amo unts
have been reclassified to reflect the current year presentatio n.
The o perating segments are seg ments of the Co mpany fo r which
separate financial info rmatio n is available and fo r which
o perating results are evaluated regularly by executive
management in deciding how to alloc ate reso urces and in
assessing performance.
As o f December 29, 2001, the Retail Pharmacy segment included
4,145 retail drugsto res and the Co mpany’s o nline retail website,
CVS.co m. The retail drugstores are lo cated in 25 states and the
District of Co lumbia and o perate under the CVS/ pharmacy name.
The Retail Pharmac y segment is the Co mpany’s o nly repo rtable
segment.
The PBM segment pro vides a full range of prescriptio n benefit
management services to managed care providers and o ther
o rganizatio ns. These services inc lude plan desig n and
administratio n, fo rmulary management, mail o rder pharmacy
services, claims processing and generic substitutio n. The PBM
segment also includes the Co mpany’s spec ialty pharmacy
business, which focuses o n suppo rting individuals that require
co mplex and expensive drug therapies. The PBM segment operates
under the PharmaCare Management Services name, while the
specialty pharmacy mail o rder facilities and 46 retail pharmac ies,
lo cated in 20 states and the District of Co lumbia, o perate under
the CVS ProCare name.
The acco unting po licies of the seg ments are substantially the
same as tho se described in Note 1. The Co mpany evaluates
segment perfo rmance based o n o perating profit befo re the effect
of no nrecurring charges and g ains and intersegment profits.
Fo llo wing is a reco nciliation of the significant co mpo nents of the
Retail Pharmacy segment’s net sales fo r the respective years:
10
200 1 2000 1999
Pharmacy 66.1% 62.7% 58.7%
Fro nt sto re 33.9 37.3 41.3
To tal net sales 100.0% 100.0% 100.0%
Fo llo wing is a reco nciliation of the Co mpany’s business segments to the co nso lidated financial statements:
Retail Pharmac y All Other Other Co nso lidated
In millions Segment Segments Adjustments( 1 ) To tals
2001:
Net sales $ 21,328.7 $ 9 12.7 $ — $ 22,241.4
Operating profit 1,079.9 39.7 (349.0) 770.6
Depreciatio n and amo rtization 301.7 19.1 —320.8
To tal assets 8,123.7 504.5 —8,628.2
Additio ns to pro perty and equipment 705 .3 8 .3 —713.6
2000:
Net sales $ 19,382.1 $ 705.4 $ — $ 20,087. 5
Operating pro fit 1,268.5 35.0 19.2 1,322.7
Depreciatio n and amo rtization 289.4 7.2 — 296.6
To tal assets 7,514.4 435.1 — 7,949.5
Additio ns to pro perty and equipment 687.1 8.2 — 695.3
1999:
Net sales $ 17,627.7 $ 470.6 $ — $ 18,098. 3
Operating pro fit 1,107.9 27.6 — 1,135.5
Depreciatio n and amo rtization 275.4 2.5 — 277.9
To tal assets 7,158.5 116.9 — 7,275.4
Additio ns to pro perty and equipment 713.3 9.4 — 722.7
( 1) In 2001, o ther adjustments relate to the $352.5 millio n Restructuring Charge and the $3.5 millio n Ne t Litigatio n Gain. See No te 2 fo r further info rmatio n on the Restructuring Charge
and No te 1 fo r furthe r info rmatio n o n the Net Litigatio n Gain. In 2000, o ther adjustments relate to the settle ment pro ce eds received from a class actio n lawsuit against certain
manufac turers of brand name prescriptio n drugs. No nrecurring charges and g ains are no t co nside red when management assesses the stand-alo ne perfo rmance o f the Co mpany’s
business segments.
29