CVS 2007 Annual Report Download - page 48

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44 I CVS Caremark
Significant Accounting Policies
Description of Business
CVS Caremark Corporation (the “Company”) operates the largest
retail pharmacy business (based on store count) and one of the
largest pharmacy services businesses in the United States.
The retail pharmacy business sells prescription drugs and a wide
assortment of general merchandise, including over-the-counter
drugs, beauty products and cosmetics, photo finishing, seasonal
merchandise, greeting cards and convenience foods through
its CVS/pharmacy® retail stores and online through CVS.com®.
The Company also provides healthcare services through its 462
MinuteClinic® healthcare clinics, 437 of which are located in
CVS/pharmacy retail stores.
The pharmacy services business provides a full range of pharmacy
benefit management services including mail order pharmacy
services, specialty pharmacy services, plan design and administra-
tion, formulary management and claims processing. Its customers
are primarily employers, insurance companies, unions, govern-
ment employee groups, managed care organizations and other
sponsors of health benefit plans and individuals throughout the
United States. In addition, through the Company’s SilverScript
insurance subsidiary, it is a national provider of drug benefits to
eligible beneficiaries under the Federal Government’s Medicare
Part D Program. The Company’s specialty pharmacies support
individuals that require complex and expensive drug therapies.
The pharmacy services business operates a national retail
pharmacy network with over 60,000 participating pharmacies
(including CVS/pharmacy stores). The Company also provides
disease management programs for 27 conditions through our
Accordant® disease management offering. Twenty-one of these
programs are accredited by the National Committee for Quality
Assurance. Currently, the pharmacy services business operates
under the Caremark Pharmacy Services®, PharmaCare
Management Services® and PharmaCare Pharmacy® names.
As of December 29, 2007, the Company operated 6,301 retail
and specialty pharmacy stores, 20 specialty mail order pharmacies,
9 mail service pharmacies and 462 healthcare clinics in 44 states
and the District of Columbia.
Basis of Presentation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated.
Stock Split
On May 12, 2005, the Company’s Board of Directors authorized
a two-for-one stock split, which was effected through the
issuance of one additional share of common stock for each share
of common stock outstanding. These shares were distributed on
June 6, 2005 to shareholders of record as of May 23, 2005. All
share and per share amounts presented herein have been restated
to reflect the effect of the stock split.
Fiscal Year
The Company’s fiscal year is a 52 or 53 week period ending on
the Saturday nearest to December 31. Fiscal 2007, which ended
on December 29, 2007, fiscal 2006, which ended on December
30, 2006 and fiscal 2005, which ended on December 31, 2005,
each included 52 weeks. Unless otherwise noted, all references
to years relate to these fiscal years.
Reclassifications
Certain reclassifications have been made to the consolidated
financial statements of prior years to conform to the current year
presentation. These reclassifications include payroll and operating
expenses associated with the fulfillment of scripts in the mail
order facilities and call center facilities within the Company’s
pharmacy services business, which have been reclassified from
operating expenses to cost of revenues.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts in the consolidated financial statements and accompa-
nying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and temporary invest-
ments with maturities of three months or less when purchased.
Short-Term Investments
The Company’s short-term investments consist of auction
rate securities with initial maturities greater than three months
when purchased. These investments, which are classified as
available-for-sale, are carried at historical cost, which approxi-
mated fair value at December 29, 2007.
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