CVS 2002 Annual Report Download - page 38

Business Segments
The Company currently operates two business segments, Retail
Pharmacy and Pharmacy Benefit Management (“PBM”).
The operating segments are segments of the Company for which
separate financial information is available and for which operating
results are evaluated regularly by executive management in
deciding how to allocate resources and in assessing performance.
As of December 28, 2002, the Retail Pharmacy segment included
4,054 retail drugstores and the Company’s online retail website,
CVS.com. The retail drugstores are located in 27 states and the
District of Columbia and operate 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 providers and other
organizations. These services include plan design and
administration, formulary management, mail order pharmacy
services, claims processing and generic substitution. The PBM
segment also includes the Company’s specialty pharmacy business,
which focuses on supporting individuals that require complex and
expensive drug therapies. The PBM segment operates under the
PharmaCare Management Services name, while the specialty
pharmacy mail order facilities and 33 retail pharmacies, located in
19 states and the District of Columbia, operate under the CVS
ProCare name.
The Company evaluates segment performance based on operating
profit before the effect of nonrecurring charges and gains and
certain intersegment activities and charges. The accounting
policies of the segments are substantially the same as those
described in Note 1.
Following is a reconciliation of the significant components of the
Company’s net sales for the respective years:
Notes to Consolidated Financial Statements
2002 2001 2000
Pharmacy 67.6% 66.1% 62.7%
Front store 32.4 33.9 37.3
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 PBM Other Consolidated
In millions Segment Segment Adjustments(1) Tota l s
2002:
Net sales $23,060.2 $ 1,121.3 $ — $ 24,181.5
Operating profit 1,134.6 71.6 — 1,206.2
Depreciation and amortization 297.6 12.7 — 310.3
Total assets 9,132.1 513.2 — 9,645.3
Goodwill, net 690.4 188.5 — 878.9
Additions to property and equipment 1,104.5 4.3 — 1,108.8
2001:
Net sales $ 21,328.7 $ 912.7 $ — $ 22,241.4
Operating profit 1,079.9 39.7 (349.0) 770.6
Depreciation and amortization 301.7 19.1 — 320.8
Total assets 8,131.8 504.5 — 8,636.3
Goodwill, net 688.7 186.2 — 874.9
Additions to property and equipment 705.3 8.3 — 713.6
2000:
Net sales $ 19,382.1 $ 705.4 $ — $ 20,087.5
Operating profit 1,268.5 35.0 19.2 1,322.7
Depreciation and amortization 289.4 7.2 — 296.6
Total assets 7,514.4 435.1 — 7,949.5
Goodwill, net 685.3 141.7 — 827.0
Additions to property and equipment 687.1 8.2 — 695.3
(1) In 2001, other adjustments relate to the $352.5 million Restructuring Charge and the $3.5 million Net Litigation Gain. See Note 11 for further information on the Restructuring Charge and
Note 1 for further information on the Net Litigation Gain. In 2000, other adjustments relate to the settlement proceeds received from a class action lawsuit against certain manufacturers of
brand name prescription drugs. Nonrecurring charges and gains are not considered when management assesses the stand-alone performance of the Company’s business segments.
36 CVS Corporation
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